Time - Scottish Construction Contracts - page 155

claim must also meet the requirements of the general law of damages. If the loss is too
remote, it will not be recoverable, see Liesbosch Dredger v. Edison Steamship (1933),
Hadley v. Baxendale (1854),and Victoria Laundry (Windsor) Ltd v. Newman Industries
Ltd (1949). The general law of damages is considered in Section 10.4.
It is usually possible for employers to estimate, with a fair degree of certainty, the
loss that they will sustain if the contractor does not complete on time. This can be
done in a number of ways, for example, by estimating additional financing costs, loss
ofrentalandthelike.Foraninterestingdiscussionofthisarea,see Multiplex Construc-
tions Pty Ltd v. Abgarus Pty Ltd (1992). As a result of this, and the desire of contractors
toixtheleveloftheirliabilitytotheemployerfordamagesintheeventoflatecomple-
tion, most building contracts are drafted in such a way that the parties fix in advance
the damages that will be payable for late completion. If these damages are a genuine
pre-estimateofthelosslikelyto be suffered by theemployer, theyarecalled 'liquidated
damages'. This subject is considered below in the next section.
What is a genuine pre-estimate of loss in the context of liquidated damages is an
issue which has prompted much debate, not least where the project in question is said
not to be commercial in nature, see Clydebank Engineering and Shipbuilding Co. Ltd
v. Don Jose Ramos Yzquierdo y Castaneda (1904). That will rarely, if ever, be the case
in a building contract.
There is much to be said for the view that, if the contractor does not like the liqui-
dated damages, he should negotiate them down before entering into the contract. It is
submitted that the view that liquidated damages provisions, where operable, provide
an exhaustive remedy to the employer for late completion is to be preferred to the
view, sometimes expressed, that it is not. The contrary view gives insufficient weight
to the considerable benefits of the agreed nature of such damages.
6.9 Liquidated damages
6.9.1 General
It is normal in modern building contracts to find a liquidated damages provision to
the effect that the contractor will pay or allow the employer a sum for each specified
period, for example, per day or per week that the works remain incomplete after the
contractual date for completion.
It is less common to find a liquidated damages provision in a sub-contract. A
sub-contract may contain a provision putting the sub-contractor on notice that in the
event of the main contractor's failure to complete the works timeously the employer
may impose liquidated damages upon the main contractor. If the sub-contractor
is on notice of this, the damages which they may become liable to pay to the main
contractor in the event that a breach of contract on their part causes delay to the
completion of the main contract may include the amount of liquidated damages
payable by the main contractor to the employer as a result of the sub-contractor's
breach.
Clauses that specify liquidated and ascertained damages for delay apply where the
worksarecompletedinnaturalcourse,butnottocontracttime.heydonotapply