The purpose of a liquidated damages provision in a construction contract is to establish in advance a fair amount of compensation to the injured party for a breach of contract to avoid spending time and money fighting over uncertain actual damages after they occur. Generally, to be enforceable, a liquidated damages provision must satisfy three
This is article explores the complex nature of allocating the risks associated with project delays. It was originally published in Schimenti Construction Company’s newsletter and is reprinted with permission.
Retail construction is no stranger to the inherent costs associated with project delays. Retailers, like all owners, rely upon construction professionals to estimate the duration of a project so that associated hard and soft costs can be quantified and properly budgeted. The majority of retail construction projects today consist of renovations to an existing store or space. It is very difficult for designers on such projects to account for and incorporate all existing conditions into their drawings and specifications. Also, as with any project, it is very difficult at the onset to predict weather, labor conditions, the availability of raw materials and other factors that might have an impact on a project’s duration. These unknowns often result in unanticipated project delays, acceleration or other impacts. One District of Columbia judge said that “except in the middle of a battlefield, nowhere must men coordinate the movement of other men and all materials in the midst of such chaos and with such limited certainty of present facts and future consequences as in a huge construction project…” Blake Cosntr. Co. v. C.J. Coakley Co., 431 A.2d 569, 575 (D.C. Cir. 1981). But, when the duration of a project extends beyond what was originally contemplated, all of the parties in the construction pyramid suffer unanticipated costs; which can and should have been addressed and allocated within the construction contracts.
There are many different ways to allocate and transfer the risks associated with project delays within a construction contract. Two of the most common provisions for doing so are “No Damages for Delay” clauses and “Liquidated Damages” provisions.
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