In this internal training video, Cian Dillon Brennan, CEO of Quantum Contract Solutions, explains liquidated damages (LDs) to construction contractors. He begins by stressing the importance of understanding contract terms to avoid costly delays and potential business failure. Using a hotel‑construction analogy, he illustrates how a single delay creates knock‑on costs for many subcontractors, creating the need for the owner to be compensated for those extra expenses. He contrasts the traditional approach—where each party must litigate to recover damages—with the modern LD mechanism, where a realistic pre‑estimated daily amount is agreed upon in the contract, eliminating the need for court. He outlines when LDs apply (after the practical completion date), how they are calculated, and the typical industry benchmarks (approximately 1% of contract value per day, capped at 10% of the contract value). He warns against excessively high LD rates and mis‑aligned practical completion dates, emphasizing the need to ensure the PC date in the contract matches the construction programme and that LDs are the sole remedy for delay. He also discusses how owners may try to enforce LDs by offsetting them against the contractor’s final invoice, giving them leverage in negotiations. Finally, he assigns viewers to record a response video summarising the material, including the hotel analogy, the origin and purpose of LDs, and the key negotiation points.
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Do you know everything you need to know about liquidated damages? Well, if you don't, this is going to teach you everything you need to know about liquidated damages on construction projects. This is an internal training that we give. I'm just giving it out to you guys so that you can implement it into your business, not be screwed over with liquidated damages, how to avoid it, what's important, essentially everything you need to know. So hi, my name is Cian Dillon Brennan. I am the CEO of a company called Quantum Contract Solutions. The reason we make these videos, there's so many construction companies out there don't really understand how to use the contract to their advantage. They end up losing money signing something they don't really understand, and it kicks in, they lose money or go out of business. We don't want that to happen to you. So watch this video, implement it. Please like and subscribe so other construction companies that are in the same position that you might know, that have been family or friends back in the day, and they can listen to this, catch it in the algorithm, and implement it into their own business. Please like and subscribe, and let's get into it. Bye. Hey, how's it going? Um, today we're going to talk about Liquidated damages, one of my favorite topics. Okay, so let's get into it. So you're gonna see this picture a couple of times over the next presentation, right? And it's very important to remember the analogy of the hotel. Okay, so in this section on this video, we're gonna pretend that we are the contractor who has been engaged by, you know, a larger company. We're going to call them the company to build this hotel. Okay, now we have been late in building the hotel for the company. We are late, and because we are late, they are now going to incur additional costs in completing the building of that hotel. Right? So if you can imagine building this hotel, there's going to be guys that are going to do the facade, the glass on the outside. There's going to be guys that are going to do the gardening at the front, the car parks, all of the internal walls, all of the electrics, all of whatever it happens to be. Now, because we're late, now they are all late. And because they're late, they're going to ask for more money because they've been late and they're going to have costs because they're late. So if one person delays the project, there's a knock-on effect. So the company is now out of pocket because we have delayed them and they're entitled to be put back into a position where they can recoup their costs. That's called damages. Let me explain further. The old way of doing things was when the contractor had delayed the company. Now the company has a loss, as I said, because they've incurred an additional cost because of the delay. It's delayed all these other people, which means it's going to cost them more money to complete the project. That term is called damages. Now typically, look at the bottom of the slide here. If you're listening to this, just listen to me. Typically, at law, you're entitled to be put back into the place that you would have been in had you not engaged with this party, right? Essentially, you're entitled to recoup your costs only, but you can't profit from this scenario, or you can't make more money from this than you've lost, right? You're entitled to get back how much money you've lost. Okay, that's called damages. Now, in the old way, if this happened, right, which happens all the time in construction, let's be real about it, is that both parties, the company and the contractor, would have to go to court to recoup their losses, right? Every time. So every time this happened, the company would have to go to court, take the contractor to court to recoup its losses. Is it worth it? Is the cost of those losses going to be more than the cost of lawyers? On both sides. So both sides will pay a significant amount in lawyers' fees to do this. So everyone loses really in this scenario except for the lawyers. The contractor have to pay for lawyers to defend themselves. The company have to pay for lawyers and obviously that money is going to eat into the settlement amount and it costs everyone money ultimately. So they come up with a new way of doing this because it happens so frequently. And the new way, let's enter the term liquidated damages. Now, what liquidated damages is, is you agree a genuine, what we think is really realistic, pre-estimate of what the costs would be to the company if they were delayed by a day, by a week. So for example, we agree that if you delay me, right, if I'm the company, and I'm delayed, you're going to pay me $1,897 per day that you delay me because that's going to cover my costs. We're going to agree that upfront and that's going to be in the contract and it's going to be put into the contract and called liquidated damages or LDs. Liquidated damages or LDs. And then if that happens, then that's how much it's going to be agreed. It's going to be, you're just going to pay $1,897. You're not going to have to pay any lawyer's fees to defend yourself. I'm not going to have to pay any lawyer fees. We're not going to to go to court to waste time. That's agreed upfront. So that's what liquidated damages is. Now, if we look at the process, the pre-award, post-award, and the defects liability period, what we're talking about is when you're awarded a contract, in the contract, it will have the PC dates. Now, the construction program should be there too, potentially, not always, but as a construction program, in there, and that date should also have the PC date. Liquidated damages kicks in every day that you're late after the PC date, right? That's essentially when it kicks in. So if you're 5 days late from the PC date, it'll be the 1895 by 5 days. That's what it is in that small example. We're talking big construction contracts, we're talking hundreds of thousands a day, okay, if not more. So It's the date after the practical completion date that the LDs kick in. If you haven't completed the work, if you haven't received your practical completion certificate signed off by that date, it's not agreed that you've reached that date, then that's when LDs kick in. Okay, now what is the problem we're trying to solve? We don't want our clients to agree to an LDs that is too high. That is just, you know, say we're in that example that it comes in at €10,000 a month, right? They just plucked a high number from the sky and they're chancing their arm. They want you to agree to it. We don't want to do that. We don't want to be charged for a period that is indefinite, right? You know, let's just say for whatever reason, and they don't agree on it, but it's delayed, you know, half a year and we're at $10,000 by half a year, all of a sudden the costs rack up pretty quickly. This could bankrupt the company. We don't want that to happen. We don't want the other party to claim LDs and then go to court for more damages. We'll explain how to navigate all these things after. And we need to make sure that the PC date is right. Let's go into it. Let's talk why. Okay, now the first one is the industry standard is about 1% of the contract value per day, no more than this. Now obviously, if it's already less, we're not going to negotiate it. But if it's higher, we're going to bring it down to what we're going to say is 1% of the contract value. Now we want to cap the LDs at 10% of the contract value. So we want to cap the risk. So they can be charged 1% per day until it gets to 10% of the contract value. Roughly, or whatever it is per day. And then at the 10% of contract value, that's it, it stops. There's no more than that. So then it can't go on forever and clean out a company. Now, we also want to make sure that LDs are the sole remedy for delay. So if they delay them significantly, that the company's only way that they can reclaim money is by LDs. They can't go take the LDs and then also go to court, which can happen. We need to make sure that the PC date is correct and they aren't already late before the contract signs. You wouldn't believe the amount of times that happens, that they're already 10 days behind, but the PC date hasn't taken into account that 10-day delay, and that delay might not be your fault. That happens all the time. If there is a construction programme, there isn't always, we want to make sure that the PC date in the contract and the PC date in the program matchup. Okay, that's what we need to make sure happens. Now, something to note about liquidated damages is some people will say, ah, I've never been hit with liquidated damages. It's just, you know, it's just something that's in the contract. Well, firstly, people do get hit with liquidated damages, but I agree that more often than not, they don't actually get enforced. What they do do instead is they say, 'Well, you've delayed me 20 days, which equates to X amount of LDs. And so what I'm going to do is—' And you're like, 'Oh no, I don't agree to that.' And you go, 'Well, what I'm going to do is I'm going to offset it against your final invoice.' And then they give that to you and you don't agree with that. But now they have all this leverage and then you come to a negotiation that isn't very favorable to you. Okay, so that's what we're going to do with liquidated damages. Now what you need to do is record a video back to me. And in that video, I want you to explain everything that was explained here, explain the hotel analogy, explain what LDs is, how it came about, when you explain what we're looking out for and what we're going to do about it. Okay, that's it. Get going.
