Liquidated v unliquidated damages
Construction contracts generally include a provision for the contractor to pay liquidated damages (or liquidated and ascertained damages, sometimes referred to as LADs) to the client in the event that the contract is breached.
Liquidated damages are a pre-agreed amount of money that is set out in advance in the contract, that fixes the sum payable as damages if the contractor breaches the contract - typically by failing to complete the construction works by the completion date set out in the contract. Liquidated damages are typically calculated on a daily or weekly basis.
Unliquidated damages are damages that are payable for a breach, the exact amount of which has not been pre-agreed. The sum to be paid as compensation is said to be ‘at large’ and is determined after the breach occurs by a court.
One of the advantages of a liquidated damages is that there is no need to prove the actual loss since the clause provides a pre-estimate of the damages to be paid. In addition to helping recover damages, this helps to provide certainty to the parties.
The advantage of unliquidated damages is that it allows for recovery of losses which may have been impossible to foresee or to estimate with any certainty before the breach.
If the contract contains an applicable liquidated damages clause, the client is generally not permitted to disregard and claim unliquidated damages instead.
In standard form construction contracts, parties will sometimes insert ‘NIL’ or ‘n/a’ for the rate for liquidated damages, if they do not wish to claim liquidated damages, however, this can imply that losses for unliquidated damages are also nil. If parties wish to exclude liability for liquidated damages, they must state this clearly in the contract to avoid ambiguity, either stating that unliquidated damages apply, or deleting the clause altogether.
[edit] Related articles on Designing Buildings
- Breach of contract.
- Collateral warranty.
- Completion date.
- Damages in construction contracts.
- Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd.
- Liquidated damages.
- Measure of damages.
- Penalty.
- Practical completion.
- The distinction between liquidated damages clauses and penalty clauses.
- Unliquidated damages.
Featured articles and news
Great British Energy install solar on school and NHS sites
200 schools and 200 NHS sites to get solar systems as first project of the newly formed Labout government initiative.
600 million for 60,000 more skilled construction workers
Announced by Treasury ahead of the Spring Statement.
The restoration of the novelist’s birthplace in Eastwood.
Life Critical Fire Safety External Wall System LCFS EWS
Breaking down what is meant by this now often used term.
PAC report on the Remediation of Dangerous Cladding
Recommendations on workforce, transparency, support, insurance, funding, fraud and mismanagement.
New towns, expanded settlements and housing delivery
Modular inquiry asks if new towns and expanded settlements are an effective means of delivering housing.
Building Engineering Business Survey Q1 2025
Survey shows growth remains flat as skill shortages and volatile pricing persist.
Construction contract awards remain buoyant
Infrastructure up but residential struggles.
Home builders call for suspension of Building Safety Levy
HBF with over 100 home builders write to the Chancellor.
CIOB Apprentice of the Year 2024/2025
CIOB names James Monk a quantity surveyor from Cambridge as the winner.
Warm Homes Plan and existing energy bill support policies
Breaking down what existing policies are and what they do.
Treasury responds to sector submission on Warm Homes
Trade associations call on Government to make good on manifesto pledge for the upgrading of 5 million homes.
A tour through Robotic Installation Systems for Elevators, Innovation Labs, MetaCore and PORT tech.
A dynamic brand built for impact stitched into BSRIA’s building fabric.
BS 9991:2024 and the recently published CLC advisory note
Fire safety in the design, management and use of residential buildings. Code of practice.