Construction workers are usually hired to perform a specific job and more importantly in a specific period of time. However, there are many occasions when general contractors have multiple projects and a finite number of workers. Invariably, this leads to many projects being delayed. Employers have added liquidated damages provisions to contracts that enable them to impose reasonable fines for each day, week or month a contractor is behind schedule.
Liquidated damages provisions in contracts are generally binding unless they are unreasonably punitive in nature. This means that if the fine for late work is egregious or so disproportionate to the work being done it will not be upheld in court.
Employers of contractors that are seeking to prevent undue delay have a strong incentive to incorporate a liquidated damages provision in their contracts. It is important to determine what the right amount of periodic losses (by each day, week, or month) when a contractor falls behind, and assign that damage to the contractor. Each case is different and must be calculated on the situation an employer is faced with. Usually, the liquidated damages provision should compensate an employer for late work.
Contractors that believe a liquidated damages provision is punitive and unduly harsh have several options. These options include:
An experienced construction attorney might be able to assist a contractor or employer regarding liquidated damages provisions. Employers can use an attorney to construct reasonable damages provisions that are not punitive but compensatory. In contrast, contractors have an incentive to not enter agreements that might have liquidated damages.
Last Modified: 06-25-2012 03:46 PM PDTLaw Library Disclaimer
We've helped more than 4 million clients find the right lawyer – for free. Present your case online in minutes. LegalMatch matches you to pre-screened lawyers in your city or county based on the specifics of your case. Within 24 hours experienced local lawyers review it and evaluate if you have a solid case. If so, attorneys respond with an offer to represent you that includes a full attorney profile with details on their fee structure, background, and ratings by other LegalMatch users so you can decide if they're the right lawyer for you.