Can the main contractor pass its liquidated damages down to me?
Only as far as your subcontract allows: under a JCT subcontract, only the loss your late finish caused, counted from your extended completion date.
Updated: . By Jack Butler-Kettle, Construction Claims Consultant.
The answer
If your subcontract sets its own rate of liquidated damages, that rate is what can be charged for your late finish. It is not the main contract's rate, or the damages your main contractor paid its client. The standard JCT subcontracts set no rate. There, and wherever else there is no rate, your main contractor can claim the actual loss your delay caused it. That may include damages it paid its client. But it has to prove the loss. It has to show your late finish caused it, not its own delay or another trade's. And where several trades were late, it has to show how the loss was shared. The JCT subcontracts, like many others, also require your main contractor to notify you that you have failed to complete before it can recover anything. Whether an amended clause that passes the main contract rate down in full is enforceable is a question for your solicitor. The evidence and the arithmetic can be tested first.
Example
Illustrative example. The scenario and figures are invented.
The facts
A client charges a main contractor £60,000 of liquidated damages, 6 weeks at £10,000. The main contractor deducts the whole sum from a subcontractor whose subcontract has no damages rate. The subcontractor's works finished 2 weeks after its subcontract completion date as extended.
What happens
- The subcontractor asks for the breakdown: which weeks of the project's delay are put down to it, and on what record.
- The main contractor's own monthly reports put the last 4 weeks of the project's delay down to its late roof.
- The subcontractor puts forward 2 weeks at the rate the main contractor actually paid, £20,000, as the most its late finish could have cost.
The passed-down charge
| Item | Weeks | Amount |
|---|---|---|
| Charged by the client and passed down | 6 | £60,000 |
| Put down to the late roof in the main contractor's own reports | 4 | £40,000 |
| Put forward for the subcontractor's late finish | 2 | £20,000 |
The outcome
The main contractor reduces the charge to £20,000, and £40,000 is returned in the next valuation.
Our Delay Damages Claim service tests a passed-down charge against the evidence of the loss and your share of it.