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Liquidated damages in construction contracts

Contractors have to juggle deadlines, clients, equipment, and crews while staying on schedule in Boise, Idaho. The contracts between contractors and owners can vary although there are certain laws in place to protect both parties. Contracts between contractors and owners usually have a liquidated damages clause, which holds the contractor liable during a contract breach.

Liquidated damages in construction

Liquidated damages in construction law are funds that cover each day the project runs over the original completion date. A contractor usually takes the liquidated damages out of what the owner owes them for the job. Having the clause in the contract can eat away an already thin profit margin if the job goes longer.

Certain factors allow owners to use liquidated damages. Owners can’t use liquidated damages clauses to threaten contractors to work faster; liquidated damages clauses help repay losses from the delay. Both parties agree on the amount per day over the completion date. Owners like these types of clauses because it gives them protection from profit loss due to a delay in the substantial completion date, which means the property is usable.

Law of liquidated damages in construction

Under construction law, liquidated damages are monetary compensation for loss, injury or damage, which the court awards after the two parties agree on an amount. The owner and contractor need to determine fault for the delay before going to the courts. Contractors usually add construction risks to their initial estimate for the job. Contractor contingency is for costs such as delays, and owners have contingency funds too.

Many times, liquidated damages end up in court, but there are ways for the owners and contractors to handle the situation. After finding fault, the party at fault handles the liquidated damages. Strengthening the owner-contractor relationship with solid contracts helps, and both parties should have an understanding of the ending date. Some contracts allow the owner to have a range around the ending date and the flexibility to change the date.