The timely delivery of professional services is crucial for all clients on all projects. When a project’s timeline is extended, a specific category of damages comes into play, delay damages. Delay damages are a category of damages that are often claimed against design entities when construction delays cause key deadlines to be missed, impacting subsequent milestones and/or the project’s complete date. Understanding these damages can be key to protecting yourself against
the claims. Let’s start by defining delay damages and their source.
What are Delay Damages?
Generally speaking, delay damages are those financial losses incurred due to a delay in the completion of work on a project which are not excusable or non-consequential. This is because not every delay gives rise to delay damages. There may be a reasonable basis/excuse for the delay, or the impact of the delay does not change critical benchmark dates and/or the date of completion. However, when a delay impacts the timely completion of tasks which cannot be cured without affecting the master schedule, these delays impact what is referred to as the critical path of the project. The critical path is an apt self-description of those combined events which are critical to meeting the completion date of the work, and where the only remedy for failure is adding more time to extend the completion date.
What Can Be Included in Delay Damages?
The below categories of damages can be incorporated into a Delay Damages claim, but each is derived from a different type and cause of damages:
Actual Damages: The actual cost of performing the additional work required under the subject contract. Generally, actual damages constitute additional labor, materials and associated costs with the change order entered for the extended time.
Liquidated Damages: Liquidated damages are a fixed sum of damages per day of delay which is agreed to by the owner and contractor in lieu of actual damages.
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