Liquidated damages for contractors' late completion of projects frequently prove contentious. A contractor is aware of the stipulation when signing the contract. But when faced with the withholding of a substantial liquidated damages assessment, the contractor usually argues the delay was not its fault and the liquidated damages clause is unenforceable.
This was the scenario in a recent case in which a power plant contract called for liquidated damages of $49,000 per day for each of three turbines. Even after being credited for excusable delay, the contractor faced more than $26 million in liquidated damages withholding. The contractor argued this was an unenforceable penalty -- the liquidated damages assessment greatly exceeded the project owner's actual cost of late completion and provided a windfall. The contractor's argument failed and the owner kept the liquidated damages.
Other cases reported this week involved bid responsiveness and the proper notice of appeal on a federal claim. A Florida court ruled that the failure to list prior projects rendered a low bid nonresponsive. And, the Armed Services Board said no particular form or language is needed for a contractor to invoke its appeal rights.
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