Almost all construction main contracts feature liquidated damages clauses. These provide for specified sums to be paid by a party in breach of specified contract provisions which almost always means late completion. The purpose of such clauses is convenience - removing the need for the developer to prove actual loss from the delayed completion, so saving a lot of effort and avoiding legal disputes. They also present an obvious opportunity to make some money, which is where the question of enforceability comes in.<p></p><p>There are lots of ways in which liquidated damages provisions might be defeated and one way is to show that a particular rate amounts to a penalty - and is therefore unenforceable. The basic position is that liquidated damages must be a genuine pre-estimate of the loss which the developer will suffer in the event of breach. As with other remedies, liquidated damages should be aimed at putting the developer (as innocent party) in the position it would have been in, had the breach not occurred, so it follows that the developer should not profit by the breach either.</p><p>The approach of the courts has remained focused on this single question - whether the rate of liquidated damages in …