Section 12.8 Liquidated Damages

• Library: Construction Law 2016 Supp

B. (§12.8) Liquidated Damages

A short discussion of liquidated damages is prudent here because liquidated damages are frequently intertwined with excusable delays. Whether an owner is due liquidated damages under the contract often turns on whether the contractor was justified in failing to complete the project by its scheduled completion date.

Liquidated damages provisions are generally enforceable unless they are deemed a “penalty” rather than an estimation of the damages an owner will face if the project is not completed on time. See generally 25 C.J.S. Damages §§ 175–195 (2002). Courts have shied away from enforcing any clause they deem a penalty because penalties are generally viewed as counterproductive to the contracting process and abhorrent to the fair compensation purpose of contractual remedies jurisprudence.

Instead, if an owner can show that the damages for late completion were impossible, or at least very difficult, to accurately estimate at the time of execution of the contract, and if the amount set is determined to be a reasonable forecast of just compensation for...