Contract is breached. In building contracts, liquidated

Contract terms and conditions see examples.


Successful and
profitable construction companies require estimators who are commercially
aware, highly skilled and pay close attention to detail. The estimator produces
an estimate of project cost to enable the company to submit a tender after the
decision has been made on the amount of profit to add to the project. This decision is based on
the company’s required return whilst taking into account their current workload
and advance order book, level of risk associated with the project, the current
and future market conditions, and the perceived workload or current order book of competitors who may
also tender for the project.

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Liquidated and ascertained damages

Contracts usually
have a provision for the contractor to pay liquidated damages to the client in the event that the contract is breached.
In building contracts, liquidated damages usually relate to the contractor failing to achieve practical completion by the completion date set out in the

Liquidated damages are not penalties, they
are pre-determined damages set at the time that a contract is entered
into, based on a calculation of the actual loss the client is likely to incur if the contractor fails to meet the completion date. They might include,
rent on temporary accommodation, removal costs and extra running costs and so
on. They are generally set as a fixed daily or weekly sum. There may be a more
complicated formulae where the works are phased, or where there will be partial possession. It is important that
the method of calculation is formally documented.

If the
project is delayed by an event that impacts on the completion date, but is not the fault
of the contractor, then this may
constitute a ‘relevant event’ for which the contractor may be granted an extension of time and the contractor could be able to make a
claim for loss and expense. A relevant event might be a delay that
is caused by the client, or a neutral event such as exceptionally
adverse weather.

The market
forces may encourage an employer, mainly during times of high inflation, to
accept the risk by including fluctuation clauses in the contract. In CT
contracts it includes three chosen fluctuation clauses that which the contracts
price will be varied either up or down because of the following:

Tax changes,
changes in wages and prices, and changes in the relevant building cost indices.







liability period


A defects liability period is a set period of time after a construction
project has been completed during which a contractor has the right to return to
the site to remedy defects. A typical defects liability period lasts for 12

If there is a contractual right for the contractor to rectify defects, and
the employer either does not notify the contractor that rectification is needed
or refuses access to the site, then the employer may be in breach of contract.
Case law illustrates, however, that the contractor will not normally be ‘let
off the hook’ if this happens. The employer will still have a claim for the
cost of rectifying the defects, but the claim is likely to be limited to the
amount it would have cost the original contractor to carry out the works. It
will not be able to claim for remedial works or working methods found not to be
strictly necessary.


Defects liability periods will only arise if they are included in the
contract. Contractors therefore need to be aware that they do not have the
automatic right to return to the site to fix any defects. Employers should give
careful consideration to the wording and requirements of defects rectification
provisions where they are considering hiring another contractor to fix the
original contractor’s mistakes.