Liquidating damages calculation for hud construction

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The court then went on to list a number of useful tests that aid the assessment.

To summarise, a sum will be a penalty if: These tests will not be definitive.

The sale of the lots was dependent on this occurring.

Therefore a delay in reaching practical completion could not have caused any financial loss to the developer until the condition had been satisfied or otherwise waived by the council.

Those in the building and construction industry are likely to come across the term “liquidated damages” in their construction contracts.

This article will explain liquidated damages in construction contracts and provide an example of its application in a recent case Spiers Earthworks Pty Ltd v Landtec Projects Corporation Pty Ltd (No 2) [2012] WASCA 53 (‘Spiers’).

The key consideration with liquidated damages clauses is whether or not the amount specified in the contract amounts to a penalty.

If the court finds that the clause imposes a penalty on the party in breach, the court will not enforce the clause.

They can be used to claim compensation for various breaches of a party’s obligations under the contract.This formula was not a genuine pre-estimate of loss flowing from the contractor’s failure to complete the works on time.Additionally, the developer had shown no actual intention of complying with the council condition requiring road improvements before the date of practical completion.For construction contracts, the parties will likely claim this type of damage where there are substantial delays, and the contractor fails to meet the practical completion date.Liquidated damages clauses operate to incentivise each party to complete their obligations under the contract on time.

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