I recently wrote an article in ConsensusDocs regarding liquidated damages and liability caps in the construction industry.
I offered the following key takeaways:
- Liquidated damages (LD) for delay and performance — in combination with liability caps and other limiting provisions such as a waiver of consequential damages — are critical tools for contractors to negotiate reasonable limitations of liability.
- Understand the key differences between delay LDs and performance LDs, including awareness that delay LDs and performance LDs can be cumulative and non-exclusive of other types of damages (such as the cost to repair defective work). Consider a cap on the contractor's aggregate liability on the entire project as one potential way to avoid uncertainty of potentially snowballing damage remedies for the owner.
- Attempt to allocate and cap risks based on risks each party can either manage, insure, or otherwise limit.
Reach out if you would like to learn more.
This article briefly outlines what you should know about
liquidated damages (LDs) for delay and LDs for failing to meet
certain performance requirements. The article also covers how
contractors can allocate and cap risks based on risks each party
can either manage, insure, or otherwise limit.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.