Liquidated damages in construction contracts


Published by a ³ÉÈËÓ°Òô Construction expert
Practice notes
In-house

Liquidated damages in construction contracts


Published by a ³ÉÈËÓ°Òô Construction expert

Practice notes
In-house
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This Practice Note explains what liquidated and ascertained damages (LADs/LDs) are and their purpose in a building contract. It considers the difference between liquidated damages and general (or unliquidated) damages and looks at the enforceability of LADs provisions and common grounds for challenging them (including that the clause is a penalty). The Practice Note also looks at how much LADs should be, capping LADs and the risks of inserting ‘nil’ or ‘N/A’ as the amount of LADs.

For summaries of key cases that consider, or are relevant to, LADs clauses in construction contracts, see Practice Note: Liquidated damages in construction contracts—case law.

What are liquidated damages?

If the parties to a construction contract agree to liquidated damages, they are agreeing, in advance, to a fixed sum that will be payable as damages in the event that a particular identified breach of contract occurs. Liquidated damages are often also referred to as liquidated and ascertained damages and the acronyms ‘LDs’ and ‘LADs’ are both commonly used to refer to them.

When liability for LADs occurs, they can typically

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Jurisdiction(s):
United Kingdom
Key definition:
Damages definition
What does Damages mean?

The monetary compensation awarded by law to a person for the legal wrong done to him.

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