Musings of a busy mind

It has become a truism that liquidated damages are enforceable, and will not offend the rule against penalties, if they represent a genuine pre-estimate of loss undertaken at the time the contract is entered into.

That position was modified significantly last month by the Court of Appeal.

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If a contract is terminated, and the project is in delay, how do liquidated damages work? If the contract has come to an end, the traditional view is that the owner's entitlement to liquidated damages falls away, and potentially greater general damages will become payable from termination.

A recent UK Court of Appeal decision considered whether or not a software development company which had failed to deliver the required software to a Thai state-owned oil and gas company was liable for liquidated damages for delay, notwithstanding that it's contract had been terminated before the due date for delivery.

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While the UK has a different jurisdiction for adjudications, under their catchily named Housing Grants, Construction and Regeneration Act 1996, the issues of adjudicating payment claim/payment schedule disputes under the "pay now argue later" regime in the Construction Contracts Act 2002 and addressing the underlying merits claims are similar.

A recent decision of the UK's Technology and Construction court of M Davenport Builders Ltd v Greer & Anor sheds interesting light unresisting the enforcement of "smash and grab" adjudications while "true value" adjudications have yet to be heard.

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