How liquidated damages work
When a construction contract sets a completion date, the employer's loss from late completion — lost rent, extended financing, holding costs — is real but hard to prove. A liquidated damages clause fixes a sum, usually per day or per week, payable for each day the works run past the completion date. Both sides get certainty: the employer does not have to litigate the loss, and the contractor knows the daily price of delay in advance.
The arithmetic has two halves, and the judgement sits in the inputs:
| Term | Meaning |
|---|---|
| LD rate | The fixed sum per day or per week stated in the contract particulars (or contract data). A weekly rate is divided by seven for daily counting. |
| EOT granted | Extensions of time already agreed or determined. They move the completion date forward and remove LD exposure day for day. |
| EOT claimed | A further extension applied for but not yet determined. It gives the best case; the worst case counts only granted EOT. |
| Cap | The ceiling on total LDs — commonly 5–10% of the contract sum, or a fixed amount. Once reached, further delay adds no LD liability. |
| Counting basis | Calendar days or business days as the contract specifies. Public holidays are not modelled on either basis. |
The calculation, step by step
- Adjust the completion date — add the granted extensions of time. Measuring delay from the original date when EOTs were agreed overstates the claim, which is the single most common error in adjudication.
- Count the net delay days — from the adjusted date to the actual (or forecast) completion date, on the contract's counting basis. Show the best case too, where the claimed EOT is also granted.
- Apply the rate per section — where the contract has sectional completion, each section carries its own completion date and LD exposure; the sections are summed.
- Apply the cap — total LDs never exceed the cap. Once the uncapped figure passes the cap, the exposure stops growing, and in some contracts that point is also a termination trigger.
- Weigh acceleration — compare the capped exposure with the cost of pulling the date back. When acceleration costs less than the exposure it avoids, accelerating is the cheaper commercial decision; when it costs more, accepting the delay is.
Delay damages in standard contract forms
| Source | Rate | Cap and notes |
|---|---|---|
| FIDIC 1999 / 2017 Red & Yellow Books (Cl. 8.7) | Rate per day stated in the contract data | Cap as stated in the contract data — commonly 10% of the accepted contract amount. Determined by the engineer under the claims procedure (Cl. 3.5 / 20). |
| World Bank / MDB Standard Procurement | Typically 0.1% of the contract price per day | Cap typically 10% of the contract price; deducted from interim payments. |
| UK NEC4 | Delay damages only if secondary option X.7 is included — rate per day in the contract data | Without X.7 there are no contract delay damages and the employer must prove general damages at law. |
| JCT building contract | Liquidated ascertained damages (LADs) at the rate in the contract particulars, often per week | Usually no fixed percentage cap; JCT 2011/2016 include a net contribution clause so LADs reflect the employer's actual net loss where relevant. |
Frequently asked questions
What are liquidated damages in a construction contract?
Liquidated damages (LDs), also called delay damages or liquidated ascertained damages (LADs), are a pre-agreed sum — usually a fixed amount per day or per week — that the contractor pays the employer for each day the works run past the completion date. They replace the employer's duty to prove actual loss item by item. A clause is enforceable in most jurisdictions only if it was a genuine pre-estimate of the likely loss when the contract was signed, not a figure designed to punish the contractor; an extravagant clause can be struck down as a penalty, leaving the employer to prove actual damages.
How do extensions of time change liquidated damages?
An extension of time (EOT) moves the contractual completion date forward, and every day granted removes a day of liquidated damages. Net delay is measured from the adjusted completion date — the original date plus granted EOTs — not from the original date, so using the original date overstates the claim. Where a further EOT is claimed but not yet determined, this calculator shows both a best case (granted plus claimed EOT) and a worst case (granted EOT only) so you can see the full exposure range.
What happens when the LD cap is reached?
Most standard forms cap total liquidated damages at a percentage of the contract sum — commonly 5 to 10 percent — or at a fixed amount stated in the contract data. Once accrued damages reach the cap, further delay adds no LD liability: the cap is the limiter, and the employer generally cannot recover more for delay under the LD clause. In some contracts reaching the cap is also a trigger for termination rights, so it is a commercial milestone, not just an accounting one.
Are liquidated damages always enforceable?
No. Courts and tribunals enforce LD clauses because they represent a genuine attempt to estimate the loss delay would cause, made at the time the contract was formed — it does not have to be accurate in hindsight, only reasonable in prospect. Under the English law test clarified in Cavendish Square Holdings v Makdessi (2015), the clause must protect a legitimate interest and not be extravagant relative to it. A clause that is grossly disproportionate to any plausible loss risks being found a penalty and refused enforcement, which leaves the employer to prove actual loss — a slower and less certain route.
Should delay days be counted as calendar days or business days?
Count the way the contract says. Most standard forms count calendar days, and that is the default in this calculator, but some contracts specify business days or working days. Business-day counting excludes Saturdays and Sundays; public holidays are not modelled, so a contract that also excludes holidays needs a small manual adjustment. The counting basis can change the exposure materially on a long delay, so check the particular conditions before relying on either.
LDs are usually deducted from interim payments — run the deduction through the Interim Payment Calculator. Escalating prices after a long delay? The Price Adjustment Calculator applies the FIDIC 13.7 weighted-index formula, and the Gantt Chart Generator keeps the underlying programme current.