Drafting Liquidated Damage Provisions in Construction Contracts: Limiting Owner's Remedies, Establishing Damage Caps

Defining Delay With Substantial Completion, Ensuring Consistency With Subcontractor Agreements

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


Wednesday, January 19, 2022

1:00pm-2:30pm EST, 10:00am-11:30am PST

Early Registration Discount Deadline, Friday, December 17, 2021

or call 1-800-926-7926

This CLE webinar will provide construction counsel with practical skills on drafting legally enforceable liquidated damage clauses. The panel will address what limits should be included, particularly limiting these damages as the sole owner remedy and defining delay, and have consistent clauses across the prime contract and all subcontractor agreements. The panel will discuss the necessities in liquidated damage provisions that overcome claims of unenforceable penalty.

Description

Few concepts in the construction industry are as universally and fundamentally misunderstood as liquidated damages. Counsel must understand the basic definition of a legally enforceable liquidated damages clause. Liquidated damages are a reasonable projection of actual damages likely to be sustained in the event of a delay, particularly when the actual damages would be difficult to determine. When both parties sign a contract with a liquidated damages clause, they accept the reasonableness of the liquidated damages.

Construction counsel should consider that the goal of a proper liquidated damage clause is to limit damages to a fixed and predetermined amount. The clause should expressly state that recovering liquidated damages is the owner's sole and exclusive remedy in the event of such a delay. Best practices dictate the use of a liquidated damages clause in conjunction with a mutual waiver of consequential damages.

Liquidated damages clauses should expressly define the event of delay that triggers the ability of the owner to assess liquidated damages against the contractor and negotiate a cap on liquidated damages, ideally tied, in some measure, to the contractor's anticipated profit on the contract. Construction counsel for contractors should consider a survival clause in the event of termination so that an owner anticipating far greater, actual delay damages than is provided for in the clause may seek to avoid the limitations of the clause by terminating the contractor.

While it seems counterintuitive, the liquidated damage provision in the prime contract should not likely be cut and pasted into all subcontracts. Counsel should consider prime and subcontractor relationships and needs and craft separate liquidated damage provisions in subcontracts that address those specific concerns.

Listen as our expert panel discusses best practices for drafting and negotiating a liquidated damages provision in a construction agreement. The panel will address the practical considerations of what to include.

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Outline

  1. Liquidated damage provisions
    1. Unenforceable penalties
  2. Sole remedy of the owner
  3. A fixed and predetermined amount
  4. Waiver of claims
  5. Delays
  6. Termination
  7. Survival
  8. Subcontractor agreements

Benefits

The panel will address these and other key topics:

  • How does an enforceable liquidated damage provision differ from an unenforceable penalty?
  • How do you limit the liquidated damages as the owner's sole remedy?
  • How can delays and termination clauses be included in the liquidated damage provisions?
  • What changes to the liquidated damage provision should be considered in a subcontract?

Faculty

Adelstein-David
David M. Adelstein

Partner
Kirwin Norris

Mr. Adelstein represents general contractors, subcontractors, design professionals, developers, associations,...  |  Read More

Cazan, Deborah
Deborah Cazan

Partner
Alston & Bird

Ms. Cazan is an experienced construction attorney and dedicated business counselor. One hundred percent of her practice...  |  Read More

Pallas, George
George E. Pallas

Managing Partner
Cohen Seglias Pallas Greenhall & Furman

Mr. Pallas acts as counsel to a wide range of construction clients including general contractors, subcontractors, and...  |  Read More

Attend on January 19

Early Discount (through 12/17/21)

Cannot Attend January 19?

Early Discount (through 12/17/21)

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.

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