LIQUIDATED DAMAGES

Question 1

1. What are liquidated damages and what is their purpose?

Answer 1

LDs are a genuine pre‐estimate of the loss incurred by the owner if the works are not completed by PC. They are to pay for any expenses the client may have to pay as a result for late completion i.e. rent for an apartment while waiting to move into their new home.

Question 2

2. Are they calculated on working days or calendar days? Why?

Answer 2

Calendar days. They apply to actual losses incurred ie rent, which are a tied based on calendar days.

Question 3

4. Under the provisions of an ABIC contract who decides if liquidated damages should apply + when?

Answer 3

If the works have not reached PC by the nominated date, the architect must notify the contractor and owner of the owner’s entitlement to LDs. The owner has up to 20 working days after the date of issue of the notice of PC to notify the architect in writing of their intention to enforce LDs.

Question 4

5. Under the provisions of an ABIC contract how are liquidated damages formally applied under the contract?

Answer 4

They are listed on the progress certificates if they have been applied.

Question 5

6. Are liquidated damages a penalty? If not what are they?

Answer 5

No. Liquidated damages are considered a genuine pre‐estimate of the loss incurred by the owner if the contractor does not complete the works by PC.

Question 6

3. Who decides the value per day? When is it determined and where is it documented?

Answer 6

The owner. It is defined in the writing of the contract.