How an employer can lose the right to claim damages for delay

In the event that building works are delayed beyond the date for completion, as a result of an event for which the contractor is not entitled to additional time, a liquidated damages clause entitles an employer to claim from the contractor a sum of money, based on a pre-determined fixed rate, for each day or week that the project is delayed.

In the absence of a liquidated damages clause, the employer has to prove the actual loss it has suffered as a result of the delay, often known as unliquidated damages.  For an employer, proving these actual losses can be both difficult and time consuming.

Both parties should be careful when completing liquidated damages clauses for delay. The English courts have previously held that a JCT Standard form of Building Contract 1980 Edition Private Without Quantities which had inserted ‘£nil’ in the  contract particulars in relation to liquidated damages was an exhaustive remedy;  in other  the employer had agreed they would be not claim liquidated damages and had also agreed not to claim unliquidated damages either- the employer would make no claim for any losses suffered as a result of  the works being delayed as a result of contractor default.  

Whilst it is clear what the position is if nil is inserted into a liquidated damages provision, it is less clear what the position is if, for instance N/A is inserted. There is a Supreme Court of Western Australia case, where N/A was inserted in a liquidated damages provision and it was held that although liquidated damages did not apply, a claim for unliquidated damages would still be allowed.

The moral is that for clarity for both parties,  an employer who does not want to claim liquidated damages but wants to retain the right to claim unliquidated damages would be wise to make that very clear when dealing with both a liquidated damages provision (for example clause 2.29.2 of the Contract Particulars of the JCT 2016 Design and Build) as well as in the body of the contract conditions.

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