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This month’s contract clinic question comes from a client looking to calculate liquidated damages. They want to set the fee for a section of a project before the completion of the whole scheme. Steven Woolnough shares his advice.

The question

We are looking to appoint a contractor to construct a shop and warehouse. Due to the cost of the build and the high rent on our current premises, we would like to use the warehouse as soon as possible before the shop is ready. How do we calculate a figure for liquidated damages in the construction contract?

The answer

Liquidated damages are a fixed and agreed sum paid for a breach of contract. In construction contracts, they are usually included in circumstances where the contractor fails to complete the works by the date in the contract. The damages will be set at a monetary value per day or week for the period the works are not completed.

If making use of a section of the project before the completion of the whole scheme would be beneficial to you – then I would advise including a ‘sectional completion’ clause in addition to a liquidated damages clause.

Click here to read Steve’s full response.

This article was written by Steve Woolnough, Senior Consultant in the Quantum / Commercial team at Decipher Group. Should you need help with a similar problem, please don’t hesitate to get in contact with us today.