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A liquidated damages clause is a clause whereby the parties to a contract fix in advance a sum of money to be paid by the defaulting party to the innocent party in the event of a breach.
Such clauses avoid the expense and difficulty of having to prove the actual damage suffered as a result of the breach. Liquidated damages clauses are only enforceable if they represent a ‘genuine pre-estimate of loss’. The parties to a contract may agree at the time of contracting that, in the event of a breach, the party in default must pay a stipulated sum of money to the other. Alternatively, parties can agree that in the event of a breach the party in default will forfeit a sum already paid to the other. In both cases, if this sum is a genuine pre-estimate of the loss that is likely to flow from the breach, it will represent agreed damages, called liquidated damages, and will be recoverable without the need to prove the actual loss suffered.
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Drafting a building contract/schedule of amendments—checklist Once the procurement route and form of building contract has been selected (see Practice Note: Choosing the right procurement method—construction projects) the employer should consider the following matters and incorporate the appropriate drafting in the building contract particulars and schedule of amendments. This Checklist assumes that the parties are using a standard form of building contract, such as a JCT form, and that the employer is proposing the first draft including the completed contract particulars and a schedule of amendments, which amends the standard terms. This list is not exhaustive, however, and there may be other project specific matters/risks that need to be taken into account: Contractual matters • Carry out due diligence on the contractor The employer needs to carry out due diligence on the contractor at the outset to determine whether its financial position is acceptable. Confirm the contractor’s company number and name at Companies House. • Obtain consultants’ details Confirm the full details of the consultants engaged by the employer; some...
Key provisions in a consultancy agreement—checklist This Checklist sets out the key provisions to consider in a consultancy agreement. This Checklist highlights issues which are relevant to the customer, issues which are relevant to the consultant and issues which are relevant to both parties for inclusion in a consultancy agreement. This Checklist will assist both the consultant and the customer when reviewing and negotiating a consultancy agreement. See also: Taking instructions for a consultancy agreement—checklist. For Precedent consultancy agreements, see: • Consultancy agreement—company and individual—pro-client • Consultancy agreement—company and company—pro-client • Consultancy agreement—individual and company—pro-consultant • Consultancy agreement—company and company—pro-consultancy • Consultancy agreement—company and individual—pro-client (short form) • Side letter to consultancy agreement—company and company—pro-client For further related guidance, see: Consultancy services—overview and Practice Notes: • Managed service companies and the anti-avoidance legislation • Deciding appropriate employment status • Personal service companies—the key benefits and key tax considerations • Securing intellectual property rights from employees and contractors • IR35—the large and public client off-payroll regime—practical considerations for the end client...
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Liquidated damages process under JCT Design and Build Contract 2024—flowchart The flowchart below summarises the key steps required in order for an employer to be able to claim or deduct liquidated damages under the JCT Design and Build Contract 2024. Although it focuses on liquidated damages for late completion of the Works, the same steps will apply in relation to late
Liquidated damages process under JCT Design and Build Contract 2011 and 2016—flowchart The flowchart below summarises the key steps required in order for an employer to be able to claim or deduct liquidated
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This Practice Note considers what liquidated damages clauses are and briefly when and how they are used. It then focuses, in particular, on the court's approach when determining whether a purported liquidated damages clause is, in fact, a penalty and therefore unenforceable; tracing the authorities through to how the question should now be approached in light of the 2015 Supreme Court Makdessi/ParkingEye decision and considering, in particular, issues such as when contractual provisions for accelerated receipt, default interest, or positive incentives may be considered as a penalty. Consideration is also given to whether liquidated damages survive termination and their relationship with partial performance.What is a liquidated damages clause?A liquidated damages clause is a clause whereby the parties to a contract fix in advance a sum of money to be paid by the defaulting party to the innocent party in the event of a breach. The sum payable represents agreed damages (called liquidated damages) and is recoverable without the innocent party needing to prove the actual loss suffered.Liquidated damages clauses can...
Professional indemnity insurance in construction projects This Practice Note looks at professional indemnity (PI) insurance in the context of construction projects—the requirement to hold insurance, the level and basis of cover and typical wording contained in clauses requiring PI insurance to be maintained. For a wider review of professional indemnity insurance, see Practice Note: Professional indemnity insurance—essentials. This Practice Note refers to a consultant’s obligations to maintain PI insurance, however main contractors and sub-contractors taking on design responsibility will also be required to maintain PI insurance and the principles referred to below also apply to those contractors. A contractor with no design responsibility may not consider it necessary to hold PI insurance, however, in the event that a contractor failed to follow the consultant’s designs, an employer may allege that the contractor made an ‘on-the-spot design decision’, which could trigger a PI policy. For more information, see Practice Note: Design liability in construction contracts—Responsibility for design under different procurement routes (in particular, the section titled ‘Traditional’). Requirement to...
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Teaming agreement—short form This Agreement is made on [date] Parties 1 [Insert name of party] [of OR a company incorporated in England and Wales under number [insert registered number] whose registered office is at] [insert address] (Party 1); and 2 [Insert name of party] [of OR a company incorporated in England and Wales under number [insert registered number] whose registered office is at] [insert address] (Party 2) Each of Party 1 and Party 2 being a party and together the parties. BACKGROUND (A) Party 1 provides [insert description of goods and/or services]. (B) Party 2 provides [insert description of goods and/or services]. (C) The parties wish to submit a Bid as a joint tender to the Customer in response to the Invitation to Tender. (D) The parties wish to set out their obligations and regulate their rights in relation to the Bid and, if their Bid is successful, they intend to enter the Customer Contract[ and the Joint Venture Agreement] in accordance with this Agreement. The...
Notice of Adjudication IN THE MATTER OF THE HOUSING GRANTS, CONSTRUCTION AND REGENERATION ACT 1996 AND IN THE MATTER OF AN ADJUDICATION [And pursuant to the [insert [‘Scheme for Construction Contracts 1998’ OR relevant adjudication procedure chosen by the parties]] Between: [Name of party 1]        The Referring Party and [Name of party 2]        The Responding Party  Introduction 1 Pursuant to the Housing Grants, Construction and Regeneration Act 1996 (the HGCRA 1996), and [[‘the Scheme for Construction Contracts (England and Wales) Regulations 1998’ (‘the Scheme for Construction Contracts 1998’)’ OR the alternative adjudication procedure chosen by the parties]], this is a Notice of Adjudication in respect of the dispute outlined below. The Parties and Addresses for Service 2 The Referring Party is [Full Name of Party 1] (‘[Abbreviated Name of Party 1]’) of [address]. The Referring Party is [set out brief description of the work it does, including the relevant type of work for the present dispute]. 3 The Responding Party is [Full Name of...
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This week's edition of Commercial weekly highlights includes: commentary on the Commercial Court's decision in Palmali Shipping SA v Litasco SA which considered whether the parties’ conduct demonstrated an intention to be bound by a contract of affreightment, news that the Advertising Standards Authority has published its latest rulings, and news that the Consumer Protection Cooperation has notified SHEIN of several practices on its platform that contravene EU consumer protection laws.
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