What could your liquidated damages clause actually cost you?

Liquidated damages are the daily (or weekly) rate in the contract multiplied by the number of days between the date for completion, as extended by any approved extensions of time, and the date you actually reach completion. If the contract has a cap, usually a percentage of the contract sum, the total stops there. If it has no cap, it keeps running. Example: $1,500 a day for 42 days is $63,000, which on a $500,000 subcontract is more than a 12 per cent margin.

The LD rate is the fixed sum per day the contract says you pay for each day you are late. It is meant to be a genuine pre-estimate of the other party's loss from delay, agreed up front so nobody has to prove actual loss later. In a subcontract it is often set by reference to the head contract's rate, which can be far larger than your package.

Across the real Australian subcontracts we've analysed, the median LD rate is $1,500 per day (n=26, August 2026). Rates vary widely with project size. What matters as much as the rate is whether liability is capped.

Mostly not: 83% of the LD clauses we've analysed carry no cap (19 of 23 where the drafting was identifiable, August 2026). The market position worth asking for is a cap at 5-10% of the contract sum. Head contractors have accepted it on comparable packages, but almost never offer it unprompted.

Yes, if your extension of time claim dies on a time bar. Every identifiable time bar in our dataset is drafted as absolute: miss the notice window and the entitlement is extinguished regardless of who caused the delay, leaving the LD clock running against you. The LD clause and the EOT time bar have to be read together.

Generally yes, if the rate is a genuine pre-estimate of loss rather than a penalty. Courts rarely rescue a subcontractor from a bad LD clause. The penalties doctrine is a narrow escape hatch, not a safety net. The reliable protection is negotiating a cap before signature.