Damages Flashcards
What are contractual damages in construction?
Compensation payable when a party breaches contract. The goal is to put the innocent party in the position they would’ve been in if the contract had been performed (Robinson v Harman, 1848).
What are the two main types of contractual damages?
- Liquidated and Ascertained Damages (LADs)
- Unliquidated Damages
What are Liquidated and Ascertained Damages (LADs)?
- A pre-agreed fixed sum set out in the contract
- Must be a genuine pre-estimate of loss (not a penalty)
- Example clause: JCT Clause 2.32
- Example case: Dunlop v New Garage [1915]
What are unliquidated damages?
- Damages that are assessed by the court after a breach
- No fixed sum agreed in advance
- Typically harder to enforce and calculate
When can LADs be applied under JCT?
- Non-Completion Certificate issued by the Architect/CA (Clause 2.31)
- Employer notifies intention to deduct LADs (Clause 2.32)
- LADs must be set out in the Contract Particulars to be enforceable
What happens if an Extension of Time (EoT) is granted after LADs are applied?
The Employer must repay any LADs deducted for the extended period (JCT Clause 2.32).
What clause in NEC4 deals with delay damages?
Secondary Option X7 – sets out the delay damages (LADs) rate and conditions for deduction.
What is the purpose of LADs?
- Avoid disputes
- Give certainty
- Save time/litigation
- Reflect genuine potential losses (not penalties)
What is the “conditions precedent” to apply LADs under JCT?
- Clause 2.31: Issue Non-Completion Certificate
- Clause 2.32: Employer gives notice before Final Certificate
- LAD clause must be in Contract Particulars
What case shows failure to re-issue an NCC invalidates LADs?
Octoesse LLP v Trak Special Projects Ltd (2016) - If a new Completion Date is set after an NCC, a new NCC must be issued, or LADs become unenforceable.
What is the test for damages to be valid in law?
- Damages must arise naturally from the breach
- Must be foreseeable by both parties
- Must not be too remote
