AEC definitions
Liquidated damages are a stated amount, usually per day, that the contractor pays the owner for finishing after the contract date. The parties agree the figure in advance as a reasonable estimate of the owner's loss, because actual delay damages would be hard to prove. A number that is a punishment, rather than an estimate, is a penalty, and penalties are often unenforceable.
Definition
The clause should say which date it runs from, usually the date of substantial completion, and which delays stop the clock, such as owner-caused delay and excusable weather if the contract allows. Charging liquidated damages for a delay the owner caused is the dispute. The amount should be set when the contract is signed, from a real estimate: rent, extended financing, lost operations. Copying a daily number from another project is how the clause becomes a penalty. Liquidated damages are not the owner's only remedy unless the clause says they are exclusive.
In depth
Extended construction loan interest, temporary facilities the owner pays, and lost use of a facility can be estimated before day one. Write down the basis. A round number chosen because it 'feels serious' is the one a court may refuse.
Different milestones can carry different amounts. A late generator may not be worth the same day-rate as a late building, if the contract distinguishes them.
A time extension for owner delay, weather the contract excuses, or a change order moves the date. Liquidated damages run only after the adjusted date. Computing them from the original date while changes are unresolved inflates the claim.
The schedule update is the evidence. A bar chart nobody maintained will not prove which delay was critical.
Some clauses make liquidated damages the owner's only recovery for late completion, and preserve actual damages for other breaches. Others allow the owner to choose. Ambiguity here is expensive.
Actual damages plus liquidated damages for the same day of delay is double recovery unless the clause carefully separates the harms.
A prime contractor who owes liquidated damages and whose subcontract has no pass-down of delay will pay the owner out of pocket. Flow the concept down with a rate that fits the trade's influence, not automatically the full prime rate on every sub.
A sub who can show the critical delay was someone else's should not carry the whole daily amount.
The pay application or a formal notice should show the days, the adjusted contract date, and the math.
Surprise deductions without a time determination guarantee a claim.
Examples
The contract sets a daily amount based on the owner's rent and loan carry. Substantial completion is 10 days after the adjusted date. The deduction is 10 times the daily amount.
A change order adds 15 days. Those days are not assessed. Damages run only past the new date.
A daily amount copied from a larger project, with no estimate of this owner's loss, is challenged as a penalty.
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