Liquidated damages (LDs)

Liquidated damages are a pre-agreed daily or weekly rate the contractor pays for finishing late - enforceable if the rate is a genuine pre-estimate of loss, and dangerous when the clause has no cap on total liability.

LDs remove the need for the principal to prove actual loss: the rate applies automatically once completion is late and no extension of time covers the delay. That mechanical quality is the point - and the risk, because the clock runs even when the delay was someone else's fault but your EOT claim died on a time bar.

The rate is only half the clause. The other half is the cap - and most LD clauses in Australian subcontracts have none, which makes the exposure the company rather than the project margin.

Why it matters to subbies

A cap at 5-10% of the contract sum is a position head contractors have accepted on comparable packages - but it is asked for before signature or not at all. Read the LD clause and the EOT time bar together; they are one mechanism.

General information for Australian subcontractors, not legal advice - contract drafting and state legislation vary and change; your document and your state's Act govern. Written by Mat Kennedy at The Construction Contracts Co.