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Dealing with Liquidated Damages Provisions Part 1

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Owners rely on contractors to deliver on the terms established in the contract. This includes building a quality structure for the agreed-upon price and meeting the deadline written into the contract. Unfortunately, performing all of these duties at a high level is daunting, and even the best contractors will be set back by uncontrollable circumstances like inclement weather or materials recalls.

When projects get delayed, it’s important to have a Miami construction litigation attorney on retainer to negotiate on your behalf to reach a fair outcome; otherwise, you could find yourself compensating an owner for liquidated damages. In this two-part series, we will discuss liquidated damages to help you avoid making the common mistakes that inhibit your ability to earn the profits you deserve.

What are Liquidated Damages?

Liquidated damages provisions are often included in contracts to give the owner the power to bill “reasonable” fines for projects that fall behind schedule. Depending on the specific details in the provision, liquidated damages can charge a fine for each day, week, or month a project is delayed.

When you sign a contract, it’s important to carefully read the liquidated damages provision to ensure that you are protected against delays from factors you can’t control like severe weather, payment delays, and materials shortages. Doing so will also allow you to avoid potential pitfalls that could lead to a claim against you or your company. For example, inexcusable work delays attributed to poor performance, defective work, or botched design plans can reasonably result in you, the contractor, compensating the owner for delays.

I Signed a Liquidated Damages Provision. What Now?

If you have signed a contract containing a liquidated damages provision, you are legally obligated to deliver the project on time or you will be required to pay for any delays. Liquidated damages provisions are almost always binding, but if the included provision is unreasonably retributive or charges disproportionate fines for delayed work, it may not hold up in court.

In part two, we will continue to discuss how to deal with liquidated damages provisions and explore the differences between reasonable and punitive damages.

If you would like to speak with our Miami construction litigation attorneys, please contact us today.

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.