Construction Contracts and Liquidated Damage Provisions: Qualifying Factors, Unenforceable Penalties, Mutual Delays

A live 90-minute CLE video webinar with interactive Q&A


Wednesday, October 13, 2021

1:00pm-2:30pm EDT, 10:00am-11:30am PDT

or call 1-800-926-7926

This CLE course will advise construction counsel on the best practices in negotiating a liquidated damage provision in a construction contract. The panel will discuss how to quantify proper damages, when the compensation is proper damages versus an unenforceable penalty, and how to avoid claims of mutual delay that would eliminate the potential collection of liquidated damages.

Description

Liquidated damages provisions are common in construction contracts to guard against damages that the owner or a contractor might suffer if a project is delayed beyond the completion date outlined in the contract. These provisions appear in both public and private construction contracts.

In the absence of a liquidated damages provision, to recover damages for delay, an owner or contractor must prove that the contractor delayed the project and the actual damages caused by the delay. Demonstrating actual damages is a difficult task that requires detailed proof that ties the loss to the period of undue delay with reasonable certainty. Thus, being able to rely on a liquidated damages for delay provision can be quite useful.

Liquidated damages are meant to approximate actual damages. Courts will consider whether the liquidated damages amount is based on a reasonable estimate of actual damages made by the owner or contractor or whether the liquidated damages amount was simply a random arbitrary amount.

Most jurisdictions operate under some form of non-apportionment rule, which states that if the owner or contractor whom the liquidated damages clause benefits are responsible for any amount of the delays to project completion, they cannot recover liquidated damages unless the contract authorizes project delays to be apportioned between the parties so that liquidated damages can be assigned to the contractor or subcontractor based on the delays they are responsible for. Construction counsel must then be prepared to show evidence of who is at fault.

Listen as our expert panel discusses best practices in drafting and negotiating liquidated damage provisions in construction agreements, how to distinguish a reasonable provision versus an unenforceable penalty, and when a non-apportionment clause might be utilized. The panel will discuss best practices in working with various stakeholders to mitigate liability and costs in construction delays.

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Outline

  1. Defining liquidated damages
  2. Establishing a formula
  3. Use in construction contracts
    1. Why include liquidated damage clauses
    2. Enforceability
      1. Reasonable vs. unenforceable penalty
    3. Non-apportionment clause
  4. Best practices

Benefits

The panel will review these and other relevant issues:

  • What is a liquidated damage provision, and how is it used in construction contracting?
  • How can counsel best establish a formula for determining liquidated damages?
  • When is a liquidated damage provision likely to be found to be an unenforceable penalty?
  • What is a non-apportionment clause?

Faculty

Gonzales, Anthony
Anthony Gonzales

Managing Principal
Spire Consulting Group

With more than 20 years of experience, Mr. Gonzales is a seasoned construction engineering expert with extensive...  |  Read More

Nudelman, Steven
Steven Nudelman

Partner
Greenbaum Rowe Smith & Davis

Mr. Nudelman concentrates his practice in construction law. For over two decades he has represented members of the...  |  Read More

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You may pre-order a recording to listen at your convenience. Recordings are available 48 hours after the webinar. Strafford will process CLE credit for one person on each recording. All formats include course handouts.

To find out which recorded format will provide the best CLE option, select your state:

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