Cian BrennanFounder, Quantum Contract Solutions · Founder

The Reality of Consequential Damages in Construction: What You Need to Know

Name: The Reality of Consequential Damages in Construction: What You Need to Know
Uploaded: 2023-10-18T22:00:33+00:00
Duration: 26 s
Channel: Cian Brennan
Description: In this segment, the speaker clarifies the distinction between liquidated damages and consequential damages in construction contracts. Liquidated damages…

18 Oct 2023 · 0 min

Watch on YouTube

0:26

In this segment, the speaker clarifies the distinction between liquidated damages and consequential damages in construction contracts. Liquidated damages are described as pre‑agreed compensation paid to other contractors when a party’s delay causes them extra costs. Consequential damages, by contrast, cover downstream losses such as a hotel’s inability to rent rooms and the resulting loss of profit. The speaker warns that, for smaller firms, the magnitude of a client’s lost profit can be large enough to threaten the contractor’s survival, highlighting the significant financial risk associated with consequential damages.

You delay them in the construction, and so liquidated damages are to compensate them for the cost of you being late. So other contractors are late, so now they have to pay them more money, just costs of you being late. That's what liquidated damages are for. Consequential damages are for them not being able to rent out the hotel rooms and losing money because of that. The problem is, if depending on the size of your company, loss of profit of your clients could be big enough to end your company.