Liquidated damages meaning

This Checklist This Checklist outlines key points to consider when preparing or negotiating liquidated damages (LADs) provisions in a building contract, with a particular emphasis on LADs for late completion. It offers practical pointers and guidance designed to help ultimately ensure that LADs provisions in a building contract are properly enforceable...

This Flowchart explains the criteria that need to be met for a court to find that an agreement amounted to an extortionate credit transaction and award relief. Consult it together with Practice Note: Extortionate credit transactions—corporate and personal insolvency...

Practice Note: Contract interpretation—distinguishing between liquidated damages and penalty clauses As highlighted in this Practice Note, working out whether a liquidated damages provision will be struck down as a penalty is seldom straightforward and often demands careful judgment. Although each dispute turns on the court’s construction of the contract, there are several points to weigh when examining the ambit of a supposed liquidated damages term and its potential exposure to a penalty challenge, both in substance and effect. When you are drafting such a clause, it is vital to keep these considerations in view, and to think about how it sits alongside connected provisions, including any related terms that operate with it. See: Drafting and negotiating a liquidated damages clause—checklist Precedent: Liquidated damages clause For targeted analysis of the way authorities have treated provisions in commercial agreements that stipulate ‘default interest’, see the following materials: Penalty interest rates in commercial contracts Contract interpretation—distinguishing between liquidated damages and penalty...

The flowchart below summarises the key steps required in order for an employer to be able to claim or deduct liquidated damages under the JCT Design and Build Contract 2024 While it concentrates on liquidated damages for delay in finishing the Works, the identical procedure equally applies to cases of late completion of a Section. Importantly, under the JCT Design and Build Contract 2024, if the contract ends before the Works are complete, the Employer may recover liquidated damages only up to the termination date, and general damages for any ensuing delay thereafter, rather than further liquidated damages for that period instead. For details, refer to Practice Note: JCT contracts—time—Liquidated damages and termination...

The flowchart below summarises the key steps required in order for an employer to be able to claim or deduct liquidated damages under the JCT Standard Building Contract 2011 and 2016. Whilst the focus is liquidated damages for delayed completion of the Works, identical steps likewise apply where there is late completion of any Section too...

UK Grid Solutions Ltd and Amey Power Services Ltd v Scottish Hydro Electric Transmission Ltd [2024] CSOH 5 What are the practical implications of this case? This decision reiterates the governing principles for assessing whether an adjudicator overlooked a defence advanced by the respondent. Where an adjudicator does not engage with a defence that would have been significant to the resolution of the dispute, the resulting award will be incapable of enforcement (Construction Centre v Highland Council). That said, the lesson emphasised here is that an adjudicator is not obliged to tackle every point ventilated in the referral, so long as their reasoning sufficiently discloses the route to the conclusion reached. In addition, the judgment confirms that the court will not decline to enforce merely because the terms of the adjudicator’s orders contain mistakes, provided it remains plain what orders were in fact intended. What was the background? UK Grid Solutions Ltd and Amey Power Services Ltd created a joint venture (the JV). In October 2018,...

On 17 April 2024, JCT released the 2024 versions of its Design and Build (DB) Contract and the Design and Build Sub-Contract (DBSub), together with the accompanying guides. The JCT Design and Build forms are aimed at projects where the contractor is responsible for completing the design as well as delivering the works. The JCT DB Sub-Contracts are intended for use where the main agreement is the JCT DB, and may apply either when the sub-contract package is fully designed or when the sub-contractor must design part or all of the works. In this piece, we explore some of the principal updates in the 2024 JCT DB documents compared with the 2016 suite, concentrating on JCT DB 2024 (ie the main contract). Reference copies of JCT DB 2024 and JCT DBSub 2024, and their companion guides, can be found on Lexis+ Construction under the sub-topic ‘JCT contracts 2024’ within the main topic ‘Standard form construction contracts’. They are also available via Practice Note: JCT contracts 2024—reference copies. What are...

On 15 May 2024, the Joint Contracts Tribunal (JCT) released its 2024 versions of the Minor Works Building Contract (MW), the Minor Works Building Contract with contractor’s design (MWD), the Minor Works Sub-Contract with sub-contractor’s design (MWSub/D), the Short Form of Sub-Contract (ShortSub) and the Sub-subcontract (SubSub) 2024. This follows the 17 April 2024 publication of the Design and Build Contract and the Design and Build Sub-Contract Agreement and Conditions, together with the related guides (see News Analysis: The JCT Design and Build Contract 2024—what’s changed?). These forms sit alongside the April releases and guides. The JCT MW and MWD suites are geared for schemes of relatively modest value where the Contractor must perform the construction works, and, for MWD, also undertake a defined element of the design responsibilities. MW covers the works, whilst MWD includes a contractor-designed portion carried out by the Contractor. The JCT MWSub/D is designed for projects where the main contract adopts the JCT MWD form, and sets out obligations concerning designs delivered by the sub-contractor...

Overview This Practice Note forms part of our LLB Contract Law series for law students. It surveys the remedies for breach of contract, with damages at the heart of the common law response. Setting remedies within the framework of contract, it explains when a party may terminate—most notably for breach of conditions and of innominate (or ‘intermediate’) terms. It then sets out the expectation principle from Robinson v Harman (1848) 1 Exch 850, stressing that an award should put the claimant in the position they would have been in had performance occurred. The Note next traces the principal constraints on recovery—causation, remoteness, and the duty to mitigate—and discusses leading cases on mitigation to show how these limits operate even once breach is proved. It also considers alternative measures—expectation, reliance and, in rare cases, restitutionary recovery—before addressing quantification, including the contrast between ‘difference in value’ and ‘cost of cure’ illustrated by Ruxley Electronics v Forsyth [1996] AC 344. Finally, it deals with non-pecuniary loss and the contemporary approach to liquidated...

Practice Note This Practice Note consolidates our content on the amendments as introduced in the 2024 editions of the Joint Contracts Tribunal (JCT) standard form construction contracts...

This Practice Note This Practice Note highlights the principal points to weigh when shaping service levels, and the recourse for missing them, within outsourcing contractual arrangements. When preparing service level agreements (SLAs), matters to consider include the category of service level, what is assessed, cost and quality, outputs and outcomes, the means of measurement, service credits and other remedies, earn back and performance incentives, and adjustments to service levels during the term. The precise measures and metrics adopted in SLAs will turn on the nature of the services. It is prepared to apply to any kind of outsourcing and does not specifically centre on IT services (though what is outlined here remains pertinent in that sphere). For IT‑specific service level material, see Practice Note: Key issues in SaaS and hardware/software maintenance SLAs and Precedents: Service Level Agreement (hardware/software fault resolution support services) and Service Level Agreement (Availability (uptime) service level for SaaS). The service level schedule is among the most significant components in an outsourcing contract. It sets how...

This Agreement is entered into on [ date ] Parties [ Insert name of party ] [ of OR a company incorporated in England and Wales under number [ insert registered number ] with its registered office at ] [ insert address ] (Party 1); and [ Insert name of party ] [ of OR a company incorporated in England and Wales under number [ insert registered number ] with its registered office at ] [ insert address ] (Party 2), each of Party 1 and Party 2 being a party and, together, the parties. BACKGROUND Party 1 supplies [ insert description of goods and/or services ]. Party 2 supplies [ insert description of goods and/or services ]. The parties intend to submit a Bid as a joint tender to the Customer in answer to the Invitation to Tender. The parties seek to state their obligations and manage their rights concerning the Bid and, if the...

This Agreement is entered into on [ insert date ] (the Commencement Date) between the following: Parties [ insert supplier name ], a company incorporated in England and Wales with registered number [ insert company number ] and whose registered office is at [ insert registered office ] (the Supplier); and [ insert customer name ], a company incorporated in England and Wales with registered number [ insert company number ] and whose registered office is at [ insert registered office ] (the Customer), each of the Supplier and the Customer being a party, and together the Supplier and the Customer being the parties. Background (A) The Supplier is [ an experienced developer of mobile applications and ] [ insert the Supplier’s background details and the background to the relevant transaction ]. (B) The Customer is [ insert the Customer’s background details ]. (C) The Supplier intends to develop the Mobile App (as defined below), and the Customer...

Date [ date ] Parties [ name of Owner ] [ of OR incorporated in England and Wales (company registration number [ number ]) whose registered office is at ] [ address ] (Owner) [ name of Developer ] [ of OR incorporated in England and Wales (company registration number [ number ]) whose registered office is at ] [ address ] (Developer) 1 Definitions Adjudication Date – the day on which any adjudicator appointed under HGCRA 1996 to determine a dispute regarding an amount due to: (a) the Developer under this Agreement; or (b) the Building Contractor under the Building Contract; delivers their decision; [ Adverse Rights – any easement, covenant, right or other interest affecting the Property, the release, discharge or variation of which is reasonably required to assist the Works or the use and occupation of the Development; ] [ Adverse Rights Agreement – any document that gives legal effect to the release,...