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?
