Cian BrennanFounder, Quantum Contract Solutions · Founder

Why a Smart Approach to Liquidated Damages is Crucial in Construction

Name: Why a Smart Approach to Liquidated Damages is Crucial in Construction
Uploaded: 2024-01-02T16:00:02+00:00
Duration: 23 s
Channel: Cian Brennan
Description: In this segment, the speaker advises that liquidated damages—penalties for construction delays—should be capped at 10% of the total contract value, with…

2 Jan 2024 · 0 min

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In this segment, the speaker advises that liquidated damages—penalties for construction delays—should be capped at 10% of the total contract value, with a daily rate not exceeding 1% of the contract value. The recommendation is presented as an industry‑standard benchmark that protects contractors from unlimited exposure in the event of severe project overruns, which could otherwise jeopardize the business. The speaker emphasizes the practical need for a cap to avoid a scenario where a contract’s delay leads to perpetual liability.

We want to cap the liquidated damages, which is the cost to reimburse the clients for them being late in construction. We want to cap that at 10% of the contract value and it to be a minimum of 1% per day. That's what we know is reasonable. You can go back to the client and we go, the industry average is 1% per day capped at 10%. If it's not capped, you really want to cap it because if the contract blows out by a long, long way, you don't want to be getting hit with liquidated damages forever. Quick way to go out of business.