Client Focused
Solution Driven

What are liquidated damages in construction contracts?

On Behalf of | Feb 15, 2022 | Employment Law |

Are you planning a major new construction project in New Jersey? There are a great many details that will need to be worked out in advance. One of them will be the potential issue of liquidated damages. These are the funds that cover the cost of continuing the project past the deadline that both parties have agreed on.

How can you qualify for liquidated damages?

The issue of liquidated damages is one that will fall under the heading of construction litigation. There are several factors that need to be in play before you can consider filing for them. You cannot use the threat of filing for these damages as a ploy to speed up the project. In addition, the amount of the damages must be agreed on by both parties in advance.

The rule of thumb for when liquidated damages apply will normally be until the point of substantial completion. This is defined as the date when the project is finished far enough to be put into use. The potential to receive damages runs out because further additions don’t prevent the property from being utilized.

The best way to prevent any misunderstandings is to work out every single detail of your construction contract in advance. This will help you to ease any issues that may arise as a result of miscommunication or unavoidable delays. The sooner you do so, the sooner you can safely begin.

When can you file for liquidated damages?

Is the project you paid for still sitting there half-finished with no sign of progress? You are entitled to take action to collect liquidated damages once the deadline both parties agreed on passes. This condition will apply if the construction project in question has not yet reached the point of substantial completion.

If this is the case, you can file a claim for liquidated damages. These will apply if you have the ability to prove your side of the story. It’s a good idea to document every stage of the project as it develops. This will give you the evidence you need to make your case.