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Liquidated Damages Provisions Clearly, the most efficient way for an owner (or contractor looking to a sub) to collect for delay occurs through an enforceable liquidated damages provision. A rule even more hostile to the imposition of liquidated damages holds that if the party seeking them contributed to the delay at all, it cannot recover them. Although clear and unequivocal no-damage-for-delay clauses are recognized as valid in most jurisdictions, courts have carved out a number of exceptions.

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A term fixing unreasonably large liquidated damages is unenforceable on ground of public policy as a penalty.”, 18 Cl. Most courts follow the “modern rule,” which allows the courts to apportion the delay between the contractor and the owner.

However, there are a few jurisdictions—such as Maryland, North Dakota, and South Carolina—that take a literal enforcement approach, holding that such an exculpatory clause is enforceable even if the delay is not contemplated by the parties. Nationally, courts and commentators have held that consequential damages are those that arise from the intervention of special circumstances not ordinarily predictable.

NIGP's Online Dictionary of Procurement Terms defines liquidated damages as "[d]amages paid usually in the form of a monetary payment, agreed by the parties to a contract which are due and payable as damages by the party who breaches all or part of the contract." The damage amount (or formula for computing damages) is specified in a contract clause.

In construction contracts, liquidated damages commonly are stated as an amount assessed per day of delay.

These provisions offer an easy method for allocation of damages associated with construction disputes, documentation of firm expectations for all parties involved, and avoidance of significant proof issues. Second, as for the amount, one historical rule of thumb used by some practitioners is to calculate the liquidated damage amount at the rate of $20 to $25 per day per $100,000 of contract price. Wallenfang, “Liquidated Damages for Delay in Construction Contracts,” . Generally, to be enforceable, an exculpatory clause must be clear and unambiguous.

The determination of whether a contractual provision for damages is a valid liquidated damages provision or an unenforceable penalty clause is a question of law. This amount approximates the investment value of 7.3 to 9.1 percent if that sum were invested elsewhere, and is based on the theory that one wouldn’t make the investment in the first place if the project didn’t have at least as much value to an owner as an alternative investment. If there is any ambiguity in the exculpatory language, the no-damage-for-delay clause likely will be adjudged inapplicable or unenforceable.

Iowa 1973), the court held that to be guilty of active interference, the public agency would need to commit “some affirmative, willful act, in bad faith, to unreasonably interfere with plaintiff’s compliance with the terms of the construction contract.” Consistent with the foregoing approach, many courts that have found “active interference” have based their conclusion on , 668 F.2d 435 (8th Cir.

— Illinois Supreme Court, 1917 Two recent case decisions cover the enforceability of liquidated damages amid claims that they operate as unenforceable penalties.

The court decided to adopt instead the same review standard used in interpreting other contractual provisions.

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