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What Are Liquidated Damages (LADs)
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- čas přidán 15. 08. 2024
- Liquidated Damages is a very common clause that can appear in construction contracts. This video explains what the Liquidated Damages clause is, why is might be used and the complications that come with trying to enforce it.
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Love you guys
Thank you for your kind comment! If there is ever a particular topic you would like us to cover please let us know :)
Should LD stands for Liquidated Damages; and LAD stands for Liquidated Ascertained Damages? I think it should be clarified
Hello Paul, thank you for your comment. Yes you are correct, in general terms we have found that LD's and LAD's are interchangeably used abbreviations however, we will look into making a video to clarify any subtle differences. This video was made just to provide a brief overview / explanation of the general premise behind Liquidated Damages
Why can’t the money withheld from retention be used as a compensation to the client, should the contractor breach contract or delays the project are LADs accurate in forecasting potential profits to be made for the client should delays occur?
Hi Lionel, thanks for your comment. You raise a good question and from experience I know some clients do try to off-set any loss due to delays etc. by keeping any retention they may have. Whether this is correct both contractually and morally is up for debate however.
Could you please expand on what you mean by "profit for the client"?
My understanding of liquidated ascertain damages are an agreed sum of the potential profit or income the client can make upon completion of the project and the contractor is liable to pay this sum should there be a delay in the completion of the project due to the contractor own fault
My question is how accurate are LAD’s and why do we assume the client is going to make an income or profit on the completed project they could very well make a loss or even face insolvency due to various factors such as lack of demand, inflation, poor economic climate,. Shouldn’t the contractor ask for some sort of assurance from the client that they will indeed make an income from the project before agreeing in any LAD’s ?. Thank you
Hello Lionel, thank you so much that makes complete sense! Really appreciate you taking the time to expand.
We completely agree with you! Unfortunately, clients do sometimes try to include a very large (and unjustified) LAD value with no reasoning or evidence for the figure. This is one of the reasons LADs are so hard for a client to actually enforce because if a claim went to court, the client would need to prove their calculation for the LAD figure and provide evidence and reasoning. If they are unable to do this then more often than not, the contractor would win.
You are right that it should be calculated on the 'true loss' the client may suffer from any delay to their project, if they cannot justify the figure, it is very unlikely the client could enforce payment from the contractor.
Recovered from the client??? It should be contractor
Hi Shiran, yes you're correct! thank you for spotting this, we will work on getting the video edited :)