A liquidated damages clause is a common provision in construction contracts that is used to settle disputes over late or incomplete work. It is a pre-agreed upon amount of money that a contractor agrees to pay the project owner if the completion of the project is delayed beyond the agreed-upon time or if the work is not completed according to the specifications outlined in the contract.

The purpose of a liquidated damages clause is to provide a clear understanding of the damages that will be incurred by the project owner if the contractor fails to complete the work as agreed upon. In addition, it eliminates the need for the project owner to prove actual damages in court, which can be difficult to ascertain in construction disputes.

Here is an example of a sample liquidated damages clause that can be included in a construction contract:

“Liquidated Damages: The contractor shall pay liquidated damages to the owner in the amount of $500 per day for each day that the work is not substantially completed by the completion date as specified in the contract. These damages are not intended as a penalty, but rather as a reasonable estimate of the damages that the owner will incur as a result of any delay in the completion of the work.

The contractor acknowledges that these liquidated damages are a reasonable estimate of the actual damages that the owner will incur as a result of any delay in the completion of the work. The contractor further acknowledges that the actual damages that the owner will incur due to the delay in the completion of the work may be difficult to ascertain, and that the liquidated damages represent a reasonable approximation of the damages that may be incurred.

The owner may deduct liquidated damages from amounts due to the contractor under this contract. If the liquidated damages exceed the amounts due to the contractor, the contractor shall pay the balance of the liquidated damages to the owner within 30 days of the date of the owner`s invoice.”

This sample liquidated damages clause serves as an example of how such a provision can be included in a construction contract. It is important to note that liquidated damages clauses can be negotiated between the parties, so it is crucial to consult with legal counsel to ensure that the terms of the provision are fair and reasonable. Additionally, the specific amount of liquidated damages and the circumstances under which they will be triggered should be clearly defined in the contract to eliminate any confusion or dispute later on.