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How liquidated damages impact construction contracts

On Behalf of | Jan 12, 2022 | Construction Law |

It’s fair to say that contractors are faced with a challenging line of work in more ways than one. Dealing with pressure from various sources is a standard aspect of daily working conditions for all New Jersey contractors.

This is why it’s unfortunate that on top of everything else, contractors have to deal with liquidated damage clauses in the contracts they sign. Under construction law, liquidated damages refer to the funds that cover the expenses related to the extension of the project past the completion date that was previously agreed upon.

An unpredictable line of work

Working as a contractor means meeting strict deadlines that aren’t always feasible, managing crews that don’t always do things the way they’re instructed to on the first time, and using equipment that may malfunction in ways that are entirely out of your control. Keeping to a rigid schedule is often all but impossible even if you assume that the conditions for the project are perfect.

But more likely, you and your crew will be dealing with anything from dramatic weather changes to unpredictable defects in supplies or tools. Furthermore, with most agreements between contractors and owners, there is a liquidated damages clause included. This is a way for owners to hold the contractor responsible for any breaches in the contract, meaning they have to foot the bill for any expenses caused by the breach.

Contractors face countless difficulties to carry out their highly essential work, not the least of which being liquidated damage clauses. These are unfortunately still a part of many owner-contractor agreements even though some experts would argue that it’s unfair to force contractors to shoulder so much of the financial burden. It’s crucial to be aware of these clauses as a contractor before entering into an arrangement that may be difficult to make profitable.