Definition
Liquidated Damages (LD) are punitive financial clauses embedded in construction contracts. If the contractor fails to achieve Practical Completion by the agreed-upon handover date (without a valid, approved Extension of Time), the client is entitled to deduct a pre-determined sum (e.g., 0.5% of the total contract value per week of delay) from the contractor's final bill as compensation for lost revenue.
Practical Example
A contractor is hired to build a retail mall by October 1st, so stores can open for the Diwali shopping season. The contract stipulates an LD of ₹5 Lakhs per day of delay. The contractor finishes 10 days late. Without needing to prove actual financial loss in court, the mall owner legally deducts ₹50 Lakhs from the contractor’s final RA Bill.
Application in Superwise
To avoid catastrophic LDs, Contractors rely heavily on the Earned Value Management (EVM) and Gantt tracking in Superwise. If the visual schedule indicates the critical path is slipping, project directors receive automated early warnings weeks in advance, allowing them to crash the schedule (deploy night shifts) to avoid hitting the LD penalty phase.
Related Feature
Learn how Superwise handles this in our dedicated feature:
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