Liquidated Damages (7 Marks) Flashcards
1
Q
What Are They?
A
- A genuine pre-assessment of actual loss suffered by the client / principal should the contractor not complete the works by the expected practical Completion date
- The liquidated damages will run from the due date for Practical Completion of the Contract Works, or Separate Section of them, to the actual date of Practical Completion of the Contract Works, or Separate Section
- Must be in the Contract Docs – specific conditions
2
Q
What is their purpose in the contract?
A
- Liquidated damages are available as a remedy, following an agreed genuine pre-assessment of the loss that the Principal will suffer if the contract works are not completed on time.
- As such they are one of the terms under which the contract is undertaken and are normally enforceable, provided that proper allowance has been made for extensions of time claimed and substantiated by the Contractor.
3
Q
How are they valued and applied?
A
- In order for Liquidated damages to be included, a genuine pre-assessment of the Liquidated damages which will arise from the late completion of the Contract Works must be made. Liquidated damages may include loss of interest that would have been earned, (or extra interest payable due to delay in completion of the Contract Works. On this basis it is possible for non-commercial bodies to establish Liquidated Damages.
4
Q
Their effect in a contract?
A
- Liquidated Damages are certain, do not have to be proven, are deducted from each payment after the date for completion has passed and incur no additional administration cost.
- At Practical Completion, liquidated damages may become payable from contractor to principle.
5
Q
Other Relevant Information
A
- Where there are no liquidated damages a Principal may still claim general damages. However general damages have to be proven, will take time to follow the required process, incur considerable costs in making the claim and the outcome may be uncertain.
