Liquidated Damages in Construction Contracts (5 things you need to know in 2023)

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Liquidated Damages in Construction Contracts (5 things you need to know in 2023) 2

Here are 5 things you need to know about Liquidated Damages in Construction Contracts in Australia:

  1. If there is a Liquidated Damages provision in your Construction Contract, and if the Contractor is late in performing its contractual obligations (and is not awarded an Extension of Time to the Date for Practical Completion), the Contractor could be charged Liquidated Damages by the Principal.
  2. Liquidated Damages are meant to be a genuine pre-estimate of the loss the Principal would suffer in the event the contract is delayed. Sometimes, the “genuineness” can be…questionable.
  3. The Liquidated Damages amount per day can be huge! Particularly in large mining and infrastructure projects.
  4. Despite what many people think, the Liquidated Damages provision also protects the Contractor to some extent, as it makes the potential liability of the Contractor for delay in the construction project quantifiable in advance.
  5. Sometimes, the possible loss of the Principal due to delay simply cannot be quantified in advance. This is often the case where the Principal is a government agency who may not suffer monetary loss if there is a delay in completion, such as refurbishment works to a museum. In these cases, the parties may agree to have unliquidated damages as the remedy for a delay. This is basically agreeing that either party may go to court to sue the other for damages – i.e., the usual relief measure under a contract.

How about you: Do you prefer having a liquidated damages provision rather than unliquidated damages for delay?

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