What might trigger the application of liquidated damages?

The application of liquidated damages typically arises when project delays occur beyond the contracted completion date. Liquidated damages are pre-determined amounts set in the contract that a contractor agrees to pay the owner for every day the project is delayed beyond the specified completion date. This provision serves to provide a measure of compensation for the owner for potential losses caused by the delay, such as lost revenue or increased costs.

In construction contracts, timely completion is often critical to the project's overall success. Therefore, if a contractor fails to meet the timeline outlined in the contract, liquidated damages will be enforced as stipulated in the agreement to ensure accountability and incentivize prompt project completion.