Timing of liquidated damages recovery and related liability issues -

Abstract

According to the Construction News (2015), sixty per cent of projects are delivered late to the employers. This shows that there is a great potential of having projects not completed on time. Most construction contracts include liquidated damages provisions that stipulate for the contractor’s payment of a pre-agreed rate for the period during which he was responsible for late completion of the works. Different jurisdictions construe delay damages differently and the standards for the validity and enforceability of delay damages clauses vary between different legal systems. This research work aims at studying the treatment of liquidated damages clauses under Common-Law, Civil-Law and Islamic-Law. Differences related to the burden of proof, enforceability of penalty clauses, eligibly to change the agreed sum and the aspects of the stipulated rate are addressed. In addition, differences exist within each one of those jurisdictions and these discrepancies are presented in the following research work. Furthermore, the provisions for liquidated damages differ between the standard construction contract forms. A comparison of the language related to delay damages - present in: ConsensusDocs, AIA, EJCDC, NEC3, JCT and FIDIC - is made to understand the characteristics of such clauses. Some contract forms have standard delay damages provisions with parameters that need to be agreed on by the contracting parties. Whereas, other forms do not provide an explicit language for delay damages; however, they advise the contracting parties to include such provisions. This research work studies also the timing of recovery of liquidated damages and the conditions precedent to the employer’s eligibility to start the collection of delay damages. Some contract forms provide that damages could be levied before the expiry of the contractual completion date while other forms call for the recovery of liquidated damages after the expiry of such period. This work recommends many strategies that could be entertained by the empl