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

Defining Delay With Substantial Completion, Ensuring Consistency With Subcontractor Agreements

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Wednesday, January 17, 2024

Recorded event now available

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


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 damages 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 damages 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 damages 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 should be included.



  1. Liquidated damages 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


The panel will address these and other key topics:

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


David M. Adelstein

Kirwin Norris

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

Hyman, Benjamin
Benjamin Hyman

Kirwin Norris

Mr. Hyman represents owners, contractors, design professionals, and materialmen. He offers practical legal solutions to...  |  Read More

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