Liquidated damages caps
Liquidated damages fix a daily or weekly rate you owe for late completion. Uncapped, they're an unlimited bet against the program: a $2,000-a-day rate with no ceiling turns a six-week delay — even one only partly yours — into an $84,000 exposure on a job you priced at a fraction of that margin. The industry-standard fix is a cap of 5–10% of the contract sum.
LDs replace arguing about actual delay losses with a pre-agreed rate — that certainty genuinely helps both sides. The clause turns hostile in two ways: a rate out of proportion to any genuine loss estimate, and the absence of any aggregate cap, which converts a normal commercial term into unlimited liability on your smallest-margin line of work.
Head contracts pass LD exposure down: your subcontract inherits a rate derived from the whole project's delay cost, applied to your slice of the work. A roofing sub carrying the tower's $10,000-a-day LDs is carrying risk priced for a balance sheet twenty times larger. Ask what the head contract rate is, and insist your exposure is proportional to your scope — the same discipline applies to one-sided indemnities flowing down beside it.
One: an aggregate cap — 5–10% of the subcontract sum is the widely used range. Two: LDs as the exclusive remedy for delay, so general damages can't be stacked on top. Three: a matching EOT regime — every cause of delay outside your control listed as a ground for extension, because time bars and EOT notices decide whether the LD clause ever actually bites. The cap negotiation playbook covers the counter-asks too. If they refuse any cap, that tells you how they expect the job to go.
If your delay costs them a fixed rate, their delay should cost them something as well: delay damages or prolongation costs payable to you when the program moves for reasons that aren't yours. A full subcontract review reads the LD clause together with the EOT, variation, and notice clauses — in isolation each looks survivable; combined is where the margin goes.
Common questions
The widely used range in subcontracting is 5–10% of the contract sum as an aggregate ceiling. Within that, check the daily rate is a genuine pre-estimate of the loss your delay would cause — not the whole project's delay cost flowed down onto your trade — and that LDs are expressed as the exclusive remedy for delay so general damages can't be claimed on top.
It's the single most dangerous term a subcontractor routinely signs: exposure limited only by how long the delay runs, on rates you didn't set, for delays that may only partly be yours. If the counterparty won't accept any cap, price the risk explicitly, tighten your EOT and notice discipline so entitlements survive, and decide whether the margin justifies an unlimited downside. Most of the time, a 10% cap is accepted when actually asked for.
The EOT clause is the LD clause's off-switch: every day of extension is a day LDs can't run. That's why the same contracts that carry heavy LD rates also carry short time bars on EOT claims — miss the 5-day notice window and the extension you were entitled to disappears, leaving the LD clock running. Read the two clauses as one mechanism, and never sign a heavy LD rate next to a tight time bar without negotiating one of them.
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