No amount for liquidated damages in the contract = no protection for the builder
By William Evans
Adapt Constructions Pty Ltd -v- Whittaker and Luff [2015] ACTSC 188
Residential building contracts - failure to insert an amount for liquidated damages.
This recent decision shows that a failure to insert an amount for liquidated damages in a contract does not prevent the owner claiming damages for delayed completion. To read more please click here.
Adapt Constructions was engaged by Whittaker and Luff to build a house in the ACT. A number of disputes arose between the parties, one of which was whether the owners were entitled to $41,000 in 'delay damages' arising from the late completion of the contract.
The relevant contract contained the following:
Rate of Liquidated Damages Per Week $____________
(if nothing stated, zero)
The builder argued that no damages were payable because there was no amount inserted into the contract. The builder said that the failure to insert a figure into the liquidated damages provision of the contract showed an intention that there would be no damages payable at all for late completion.
The ACT Supreme Court rejected the builder's argument. The court determined that the failure to insert a figure into the liquidated damages clause did not (of itself) prove an intention to exclude the owner's right to claim delay damages. If that was the intention of the parties, the court said, then the contract would have had to expressly state the intention to exclude delay damages in clear and unambiguous terms.
As the contract did not contain any express provisions excluding all types of delay damages, the court held that a failure to insert an amount for liquidated damages did not exclude the owners from claiming any delay damages. Accordingly the owners were successful.
Points to take home
- No liquidated damages does not mean no damages at all
- Failure to insert a figure into the liquidated damages clause in a contract does not prevent the owners from claiming damages for delay
- If it is the parties' intention to exclude all forms of delay damages (both liquidated and unliquidated) then that should be clearly stated in the contract
You can read the full decision here.
If you have any questions or concerns, please contact our Commercial Litigation team.