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Understanding Consequential and Liquidated Damages Part 3

As we covered in the first and second section, consequential damages are extremely challenging to prove in a legal context. In many cases, liquidated damages can be a fair compromise to avoid dealing with consequential damages. In this article and in the final article of our four-part series, we will cover the ins and outs of what liquidated damages are and whether or not contractors should be liable for them.

If you are a contractor and have a contract that includes a clause in regards to liquidated damages, you may want to speak with a Jacksonville construction lawyer to obtain a better understanding of your agreement.

What Are Liquidated Damages?

When negotiating a contract prior to the start of a construction project, both the contractor and owner can agree on a fixed sum of money that either one may have the option to recover if the other party is in breach of contract. This fixed sum of money is referred to as the liquidated damages. Typically, in the construction industry, this clause is included in a contract to encourage the contractor to complete the project by the set completion date articulated in the contract. In other words, if the contractor fails to meet the agreed-upon completion date, the contractor may be required to pay the owner the fixed sum established in the contract.

How is the Fixed Amount Determined?

The overall compensation owed is based on a calculation of the projected loss of income the owner would incur if the completion date is not met. This calculation is determined off of a variety of factors that pertain to the specific project. Typically, the fixed sum is determined as a daily or weekly amount the contractor would owe the owner if the project remains incomplete.

If you would like to speak with one of our Jacksonville construction lawyers, please contact us at 904.425.5030, or submit our contact request form.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.