June 23, 2022 – With unpredictable supply chain disruptions continuing to plague the industry, liquidated damages provisions and breach of contract claims arising from construction delays are receiving more scrutiny. This is because, depending on the terms of a project contract, contractors and subcontractors may be liable for schedule delays that arise when materials and supplies are held up in the supply chain crisis.
This is why construction contract provisions about liquidated damages and construction delays are important to consider together. In a liquidated damages provision, the parties preemptively agree to the amount of damages the non-breaching party will incur in the event of a breach. Liquidated damages provisions are typically useful for construction delays where delay damages are difficult to calculate, and are often included by owners who want to recoup losses resulting from a project not being completed as scheduled.
The state of today’s supply chain requires contractors and subcontractors to carefully consider the consequences of liquidated damages provisions and whether these stipulations can be triggered by material and supply delays that are out of their control. Parties that wish to avoid liquidated damages liability in these instances should consider negotiating to exclude material and supply delays from triggering a breach that results in liquidated damages, for example, by including excusable delays or other extensions of time.
Owners, contractors, and subcontractors should all evaluate how to include liquidated damages provisions in their contracts and whether material and supply delays set those provisions in motion. Experienced construction counsel can help you evaluate how best to use these provisions and address possible issues that may arise in the face of supply chain challenges.
Ulmer’s Construction Practice Group is made up of experienced attorneys who have been operating in the construction industry for decades. Our time-tested team has handled almost every kind of legal issue that arises in the construction industry and can help you anticipate and manage risk in construction projects. Please reach out to our attorneys if you have any questions.
The information provided in this insight speaks only to the information and guidance we have available as of the date of publication and is subject to change. We will continue to follow further issued guidance and regulations and endeavor to post those updates via our website. Please continue to follow these updates at ulmer.com. This insight was created by Ulmer & Berne LLP, and is not intended as a substitute for professional legal advice. Receipt of this insight, by itself, does not create an attorney client relationship. For any questions, or for further information, please contact Jason P. Conte at email@example.com.