The construction industry has its fair share of legal terms. Some important ones to understand are those associated with monetary damages.
Liquidated Damages and Consequential Damages are two of the most common issues negotiated in construction contracts and are often misunderstood.
Liquidated damages are an amount of money that contracting parties agree to as the amount of damages an Owner can recover if the Contractor breaches the contract. They are typically expressed as a dollar value per day (for ex. $100.00/day). Liquidated Damages must have some relevance to the actual damages an Owner may suffer as a result of the Contractor’s breach.
Liquidated Damages also allow Owners to protect themselves against delays that may cause a project’s completion to extend beyond the agreed upon contract completion date. They are guaranteed financial protection to the Owner.
Consequential damages occur when the Contractor breaches a contract and is liable for all foreseeable losses incurred by the Owner. They go beyond the express terms and conditions of the contract itself and into the actions that flow from the breach. Some examples include any profits, rents, financing costs, or business opportunities that are lost. Consequential Damages do not include any unforeseeable losses.
It is extremely important to know to what extent you may be liable for these damages when all contracts are reviewed. Your company’s future could be at stake.

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