Are liquidated damages clauses in construction contracts enforceable? That’s a question that is often litigated in construction disputes.

It’s not surprising that some of the most popular articles on this blog address examples of courts refusing to enforce liquidated damages clauses in a construction contracts. For two examples of Florida courts finding liquidated damages clauses unenforceable, click here and click here.

Generally, liquidated damages provisions are enforceable. But there are circumstances where courts will refuse to enforce such a provision. Under Florida law, a liquidated damages clause will not be enforced if a court concludes it is a penalty clause. There is a two-part test for determining whether a liquidated damages clause will be stricken:

(1) the damages flowing from a breach of contract are not readily ascertainable; and

(2) the daily rate of liquidated damages is not grossly disproportionate to the damages that might be expected to flow from a breach.

While not a Florida case, a Georgia court recently considered whether a liquidated damages clause in a construction contract was enforceable.Continue Reading Georgia Court Refuses to Enforce Liquidated Damages Clause

The enforcement of liquidated damages provisions is a topic that gets a lot of attention in construction-contract disputes. Some of the most popular posts on this blog include examples of courts refusing to enforce liquidated damages provisions. (Click here for one example and click here for another example.)

One reason a court may refuse to enforce a liquidated damages provision is because the specified daily rate of liquidated damages is “grossly disproportionate” to the actual damages that are expected to be suffered due to the contractor not completing the project on time.

In addition, even if a liquidated damages clause is enforceable, it is possible that an owner can waive the right to claim liquidated damages. Under Florida law, to establish waiver, a party must show an intention to give up a known right. A waiver can be express or implied through conduct.

A federal court recently considered whether a project owner waived its right to seek liquidated damages as a matter of law.Continue Reading Can a Project Owner Waive Its Right to Claim Liquidated Damages?

I recently gave a presentation on essential construction contract provisions at the annual conference for the Florida Municipal Attorneys Association. Part of my presentation addressed liquidated damages clauses in government construction contracts. After speaking, I was approached with follow-up questions about how to determine the proper daily rate for liquidated damages in construction contracts.

A liquidated damages clause is an owner-preferred contract provision that usually sets a fixed amount for which the contractor is liable to the owner if the project is not finished on time. Often, the amount is set as a certain sum of money per day the project is late (e.g., $1,000 per day).

Generally, liquidated damages provisions are enforceable. But there are circumstances where courts will refuse to enforce such a provision (click here for a recent Florida case where the court found a liquidated damages provision unenforceable).Continue Reading Court Finds Liquidated Damages Clause Unenforceable

Two contract provisions that are frequently litigated in construction disputes are no-damages-for-delay and liquidated damages clauses. A no-damages-for-delay clause typically provides that if there is a delay caused by the owner or others, the contractor will not be entitled to any additional compensation for that delay. It is a clause that project owners love because it limits their liability for delays on the project.

Similarly, a liquidated damages clause is an owner-preferred contract provision that usually sets a fixed amount for which the contractor is liable to the owner if the project is not finished on time. Often, the amount is set as a certain sum of money per day the project is late (e.g., $1,000 per day). The Florida Second District Court of Appeal recently addressed both those provisions in an opinion it issued in January 2022.Continue Reading Florida Court Finds No-Damages-for-Delay and Liquidated Damages Clauses Unenforceable