Liquidated Damages
Categories: Regulations
Normally, we love being a custom pool builder, but this latest client has us about ready to rip out our hair, or at least what's left of it. The original plan was that the pool would take six months to build and would cost about $40,000. (Pools ain’t cheap, folks.) But our client, Steve, keeps changing the specs. First, he added a water slide. No big deal. Then he wanted bubblers and a tanning shelf. Okay, fine. Now he wants us to add a lazy river, a swim-up bar, and a flippin’ island in the middle of the pool. Not only has this doubled the cost of construction, but it’s also added a good three months to the timeline.
Luckily for us, though, we made sure to include a liquidated damages clause in the initial construction contract. “Liquidated damages,” often referred to as LDs by those in the know, basically refers to how much money one party owes the other if there is a breach of contract. In this example, our contract specifies that the project will cost $40k and take six months; if one party ends up doing stuff that seriously impacts the contract terms, the other can sue for LDs. How much those LDs are depends on how we calculate the value of the loss. With regard to Steve’s pool, not only are we talking about an extra $40k and additional three months, we’re also talking about the time and money we’re going to lose because we have to delay working on other projects so we can satisfy Steve’s every pool whim. So we might say that, in this instance, we’d like to see an extra $65,000 in liquidated damages.
Will we automatically get it? Mmm, probably not. Even with the LD clause in our contract, we still need to prove that it was Steve and Steve alone causing the delay and additional expenses. If we’re both liable, then there’s a good chance we won’t get everything we’re asking for.
Oh—and BTW, if we want to get anything at all, we’re going to have to file suit against Steve. Because in cases like this one, the actual amount of liquidated damages is calculated not by us or by Steve, but by the court handling the case.
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