Uncapped liquidated damages: why one late week costs more than your margin
Uncapped liquidated damages have no ceiling. At the Index median of $1,500 a day when the book was written, six weeks late costs $63,000, more than the whole margin on a $500,000 package. A cap of 5 to 10 per cent of the contract price is the market position on well-drafted contracts.
Chapter 3: One late week costs more than your margin
The most dangerous number in your subcontract isn't the price. It's the figure next to "liquidated damages". When the book was written (Sept 2026), the median rate in the Australian Subcontract Index was $1,500 a day and 24 of 28 LD clauses had no cap. On a $500,000 package at an 8 per cent margin, your $40,000 of profit is gone in about four weeks of delay. After that you're paying the builder to finish their job. On a $1.2 million façade subcontract I worked through in 2026, the rate was $20,000 a day, uncapped.
Liquidated damages are meant to be a genuine pre-estimate of the builder's loss from your delay. In practice the figure is often the head contract rate handed straight down to every trade, so thirty subbies each end up insuring the whole tower. A subcontractor I advised was offered a $5 million package at $15,000 a day. We asked one question in writing, what the figure was a pre-estimate of, and the rate came down to $3,000 a day, capped at 10 per cent.
The chapter also covers the traps around the rate: a completion date written as "as per programme", the builder's choice of LDs or actual costs, head contract flow-down, and a list of qualifying causes of delay that says only "Variations". The ask is a rate tied to your package, a cap, LDs as the sole remedy, a fixed date and a proper list of reasons for more time.
- 1When the book was written (Sept 2026), 24 of 28 LD clauses in the Index had no cap, at a median rate of $1,500 a day.
- 2One week late on the median contract is $10,500; on the $1.2 million façade contract it was $140,000.
- 3Builders most often hold on the rate and give on the cap: a $5,000 rate capped at 5 per cent of a $1.2 million contract is a $60,000 worst case.
- 4A short list of qualifying causes makes even a fair rate dangerous, because every delay not on the list runs the LD clock.
Find the LD rate and the date for completion in your current subcontract. Multiply the rate by 30. If that figure is bigger than your margin on the job, you've found the first clause to negotiate on the next one.
Common questions
Are uncapped liquidated damages normal in Australian subcontracts?
They're common. When the book was written (Sept 2026), 24 of 28 LD clauses in the Australian Subcontract Index had no cap. Common doesn't mean fair: a cap of 5 to 10 per cent of the contract price is the market position on well-drafted commercial contracts, and it's often negotiable before you sign.
Can liquidated damages be a penalty?
Generally, liquidated damages are enforceable if they're a genuine pre-estimate of the builder's loss. A rate with no relationship to the loss your delay could cause may be challenged as a penalty, but that argument is uncertain and costly. It's usually better to negotiate the rate and a cap before signing. Get advice on your contract.
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A summary of chapter 3 of Screwed Down by Mat Kennedy. Index figures are as they stood when the book was written (Sept 2026); the live numbers are on the Index. Amazon ranking as seen in September 2026. General information, not legal advice.