How to calculate liquidated damages in construction?
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Liquidated damages, also referred to as “liquidated and ascertained damages” (LADs), are damages whose amount the parties designate during the formation of a contract for the injured party to collect as compensation upon a specific breach. The calculation of liquidated damages typically involves an analysis of the total cost of completing or repairing the work or project, the anticipated costs of the delay, and the effect of the breach on the injured party’s income.
In addition, the time value of money should be considered when computing the amount, as well as the willingness of the parties to negotiate the quantum of liquidated damages at the time of entering into the contract.