Recovery of damages beyond the limit of unenforceable liquidated damages clause

Abstract

Standard forms of construction contracts typically include a liquidated damages provision entitling the employer a specified sum if the contractor is late in completing a work. However, such clause can be unenforceable due to a myriad of reasons, such as when time is at large. If that happens, the employer could not claim liquidated damages but may claim unliquidated damages instead. The issue is then whether the employer may claim unliquidated damages exceeding the sum specified in the liquidated damages provision although the clause is held to be unenforceable. The methodology utilized in this research is mainly through documentary analysis of court rulings. Six cases were shortlisted for analysis based on their relevance to the issue. The findings show that liquidated damages sum in construction contracts is always intended to cap the contractor’s liability for delay, thus, the employer may not recover more than the stipulated sum if the sum represents the parties’ intention even when the liquidated damages clause is unenforceable.