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ConstructionPro Week, Volume: 3 - Issue: 42 - 10/17/2014

How Many Ways Can Owners Forfeit the Right to Liquidated Damages?

By Bruce Jervis

 

The assessment of liquidated damages for late completion would seem straightforward to administer. When the work remains incomplete beyond the contract deadline, the project owner withholds the stipulated daily amount for each calendar day. Yet, project owners repeatedly trip themselves up by failing to act promptly and decisively.

 

The problem of waiver is well known. If an owner urges continued performance beyond the completion deadline without expressly establishing a new, reasonable completion date, the owner may be held to have waived the right to withhold liquidated damages. A recent situation on a federal project adds another twist.

 

Protracted negotiations regarding final payment, combined with a presumed lack of government diligence, caused the government to formally assert its claim for liquidated damages more than six years after the contractual completion deadline. The contractor said the withholding was barred by the claim limitation period of the Contract Disputes Act.

 

The government argued that liquidated damages constitute a “continuing claim” and it could recover for the days of late completion that fell within the limitation period. This argument failed. The claim for liquidated damages was entirely time-barred.

 

Liquidated damages are a sensitive matter. Project owners want to encourage completion of the work, negotiate unresolved extra work items, and close out the contract in an expeditious manner. The assessment of liquidated damages can impede this process. Yet, owner indecision can forfeit the right to the owner’s best remedy for late completion. What is your opinion?

 

COMMENTS

Timeliness of owner and owner designated representative responsibility and communication frequently creates the situations causing the delay. The fact that the owner did not act timely in excercising their perceived right to liquidated damages should void that right.
Posted by: Tom Miller - Friday, October 17, 2014 10:35 AM


Owner's must exercise their right otherwise it will appear to the Contractor that the owner is waiving LD. Yes, there may be considerations such as extra work or other reasons which contributed to a delay of the work which may be attributable to either or both the contractor and the owner. The effects of good will, good intentions or fair negotiating may interfere with the exercising of LD's. Until resolved all good intention must be put aside for the sake of fairness to both parties, owner's must hold back LD amount which will motivated both parties to work sooner to resolve the matter. To recapture LD's at a later date will be impossible, if full payment has already been received, but will be unfair to the Contractor as now unacceptable. I agree that LD's are time sensitive.
Posted by: John Sek - Monday, October 20, 2014 10:50 AM










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