What Are Ascertained Damages In Construction?

What Are Ascertained Damages In Construction?

What Are Ascertained Damages In Construction?

Ascertained damages in construction are a predetermined amount of money agreed upon by parties in a contract to compensate for a breach of contract in the construction industry. These damages are commonly used to address delays in completing the works, but they can also apply to other specified breaches. They are typically a fixed amount calculated based on a reasonable estimate of the losses the non-breaching party could incur.

Ascertained damages are sometimes referred to as liquidated damages, which can include delay damages, performance damages, and target internal area damages. They provide certainty to both parties as to the consequences of a breach, limit the liability of the breaching party, save time and cost by avoiding disputes over actual damages, and act as a deterrent against contract breach.

Key Takeaways:

  • Ascertained damages in construction are a predetermined amount of money agreed upon by parties in a contract to compensate for a breach of contract.
  • They provide certainty to both parties as to the consequences of a breach, limit the liability of the breaching party, and save time and cost by avoiding disputes over actual damages.
  • Types of ascertained damages include delay damages, performance damages, and target internal area damages.
  • Liquidated and ascertained damages play a crucial role in construction contracts and act as a deterrent against breach of contract.
  • It is important to ensure that these damages are reasonable and not excessive to be enforceable.

Types of Ascertained Damages in Construction

When it comes to construction disputes and litigation, understanding the different types of ascertained damages is essential. Ascertained damages are predetermined amounts of money agreed upon in a contract to compensate for a breach of contract in the construction industry. These damages provide a specific amount of compensation in case of a breach, helping to avoid lengthy disputes over actual damages.

One common type of ascertained damages in construction contracts is delay damages. These damages compensate the non-breaching party for any delays in completing the works. They ensure that the party who suffers from the delay is appropriately compensated, without having to go through the process of proving the actual losses incurred.

Another type of ascertained damages is performance damages. These damages come into play when there is a failure to meet certain performance standards outlined in the contract. By setting a predetermined amount for performance damages, the non-breaching party can receive compensation without having to go through the complexities of calculating actual damages.

Lastly, target internal area damages relate to the failure to achieve a specified internal area measurement. In certain construction projects, there may be specific requirements for the internal area of a building or space. If these requirements are not met, the non-breaching party can seek compensation through target internal area damages.

In summary, understanding the various types of ascertained damages in construction is crucial for both parties involved in a contract. These damages provide a clear and predetermined amount of compensation in case of a breach, helping to avoid lengthy disputes over actual damages. By incorporating these clauses into contracts, construction professionals can have peace of mind knowing that they are protected in the event of a breach.

 

The Importance of Liquidated and Ascertained Damages in Construction Contracts

Liquidated and ascertained damages play a crucial role in construction contracts, particularly in preventing and resolving disputes that may arise during construction projects. These damages provide certainty and predictability by clearly stating the consequences of a breach, helping both parties involved plan for potential delays or breaches that could impact the project’s timeline or quality.

By incorporating liquidated and ascertained damages clauses into contracts, the non-breaching party can seek compensation for any financial losses incurred due to the breach. These damages limit the liability of the breaching party, ensuring that their financial obligation will not exceed the agreed-upon sum. This helps protect the non-breaching party and provides them with reassurance that they will receive compensation for damages caused by the breach.

One of the key advantages of using liquidated and ascertained damages is the time and cost savings they offer. By avoiding lengthy disputes over actual damages, parties can save valuable time and expenses that would otherwise be spent on legal battles. Instead, they can focus on resolving the breach and mitigating any further impact on the project. This streamlined approach minimizes disruptions and allows construction projects to progress smoothly.

Moreover, liquidated and ascertained damages act as a deterrent against breach of contract. Both parties are aware of the exact financial consequences of non-compliance, which encourages them to fulfill their contractual obligations. This helps maintain trust and fosters a collaborative working relationship between the parties involved in the construction project.

In order to ensure the enforceability of liquidated and ascertained damages clauses, it is crucial to draft them in a reasonable and non-excessive manner. Parties should consult experienced attorneys familiar with construction law to ensure that the clauses meet legal requirements and are fair to both parties. With proper drafting and incorporation, liquidated and ascertained damages clauses can be a valuable tool for managing construction disputes, preventing litigation, and ensuring contractual damages are appropriately addressed.

FAQ

What are ascertained damages in construction?

Ascertained damages in construction are a predetermined amount of money agreed upon by parties in a contract to compensate for a breach of contract in the construction industry.

What types of breaches do ascertained damages apply to?

Ascertained damages commonly address delays in completing the works, but they can also apply to other specified breaches in construction contracts.

What are the different types of ascertained damages?

The most common types of ascertained damages in construction contracts include delay damages, performance damages, and target internal area damages.

How do ascertained damages provide certainty to both parties?

Ascertained damages provide certainty by clearly stating the consequences of a breach, helping both parties plan for potential delays or breaches.

How do ascertained damages save time and cost?

Ascertained damages save time and cost by avoiding lengthy disputes over actual damages that may arise from a breach of contract.

How do liquidated and ascertained damages limit liability?

Liquidated and ascertained damages ensure that the breaching party’s financial obligation will not exceed the agreed upon sum, thus limiting their liability.

Can liquidated and ascertained damages act as a deterrent against breach of contract?

Yes, liquidated and ascertained damages act as a deterrent as the breaching party knows the exact financial consequences of non-compliance.

Are liquidated and ascertained damages enforceable by the courts?

Liquidated and ascertained damages are enforceable by the courts if found to be reasonable and not excessive.

Should parties consult with attorneys when incorporating liquidated and ascertained damages into their contracts?

Yes, parties should consult with experienced attorneys to properly draft and incorporate these clauses into their contracts.

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