This post was published to Online Education at 8:45:53 PM 12/20/2015

Construction Contracts Simplified-Part 2

Account Online Education

The word “liquidated” means settled or discharged or honored . When a contractor fails to execute the
contract, liquidated damages are imposed. Generally, they are applied when facility gets delayed or it
does not perform. In both these situations, the Owner suffers losses because of delays.

Losses may be difficult to quantity. Hence, these are negotiated before award of the contract. In short,
LDs are a pre-estimate of the damages suffered by the Owner. They are calculated as a percentage of
the contract price.

The Owner knows the recovery that he can get and the contractor knows the exact loss in case of
failure. No measurement of actual losses is needed. LD amount, if applicable, will replace the actual
losses, whatever it may be.

If the delay is not on account of the contractor, the contractor can request the client for an extension.
This is known as Extension of Time. Getting an extension relieves the contractor from Liquidated
damages.