In 2019 the construction industry was thrown into a state of confusion (before COVID or BREXIT had a chance to try) by a Court of Appeal ("COA'") decision turning on its head the long held "orthodox" view that liquidated damages ("LDs") for incomplete works would only accrue until contract termination, not to completion of the works.
On appeal of this decision in Triple Point Technology Inc (Triple Point) v PTT Public Company Ltd (PTT) [2021] UKSC 29 the UK Supreme Court ("UKSC"), in its eagerly awaited judgment, has provided some much needed clarity to the industry on the applicability of LDs until termination. The UKSC unanimously held that LDs would indeed only apply up to termination of a contract, irrespective of whether the works were completed by the Contractor or accepted by the Employer. The UKSC held that to accept otherwise was "inconsistent with commercial reality and the accepted function of liquidated damages".
This decision provides certainty in this respect for Employers and Contractors moving forward (and not to mention a sigh of relief for Employers under current contracts which under the COA ruling may have had LD regimes of questionable enforceability in the event of termination). Despite this newfound clarity it will be interesting to see if parties or industry groups, out of an abundance of caution, also seek to address this in drafting as we have seen the NEC4 suite, to include amendments making it clear that delay damages will cease at termination.
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