Liquidated damages for delay
Liquidated (and ascertained) damages (LDs or LADs) are a fixed sum per day or week that the contractor pays if it finishes late without an extension of time. They give both sides certainty: the client doesn’t need to prove its actual loss, and the contractor knows its maximum exposure for delay if the contract caps it.
Since Cavendish Square Holding v Makdessi [2015], a damages clause is only an unenforceable penalty if it imposes a detriment out of all proportion to the innocent party’s legitimate interest. A rate based on a genuine attempt to assess likely loss is rarely struck down. In Triple Point Technology v PTT [2021] the Supreme Court confirmed that LDs accrue up to termination even if the contractor never completes. Make sure the rate in the contract is filled in: “£nil” or a blank can mean no delay damages at all.
Design liability
Where a contractor designs, the contract will set its standard of care: usually reasonable skill and care, the standard expected of a competent professional designer. A fitness for purpose obligation is stricter: the result must work for its stated purpose, whether or not the designer was careful, and it’s often not covered by professional indemnity insurance. JCT 2024 design and build terms limit the contractor’s design liability to reasonable skill and care unless otherwise required. Look for fitness for purpose wording hidden in Employer’s Requirements or amendments.
Defects and time limits
- Rectification period: the contractual window (often 12 months) to come back and fix defects. It doesn’t limit the contractor’s liability for defects found later.
- Limitation periods: claims for breach of contract must generally be brought within 6 years of the breach for a simple contract, or 12 years if the contract is executed as a deed, under the Limitation Act 1980. In Scotland, different prescription rules apply.
- Defective Premises Act 1972: anyone who takes on work for or in connection with providing a dwelling must do it in a workmanlike or professional manner, with proper materials, so the dwelling is fit for habitation. The Building Safety Act 2022 extended the time limit for these claims to 15 years for future claims and 30 years for claims that arose before 28 June 2022. See URS v BDW [2025] in our case studies.
Insurance, bonds and warranties
- Insurance of the works: standard forms offer options for who insures the new works and any existing structure against fire and other risks. With existing buildings, check the client’s own insurer accepts the arrangement.
- Liability insurance: public and employer’s liability; and professional indemnity insurance where the contractor designs.
- Performance bonds and parent company guarantees: security for the client if the contractor defaults or becomes insolvent.
- Collateral warranties and third party rights: give funders, purchasers and tenants a direct contractual claim against the contractor or consultants. Their wording matters as much as the main contract’s.
Termination
Standard forms let either side terminate for specified defaults (such as suspending work without cause, failing to proceed regularly and diligently, or failing to pay), and for insolvency. The procedure matters: most require a warning notice specifying the default, a period to put it right and a further notice to terminate, served in the way the notice clause requires. Getting it wrong can turn a lawful termination into a repudiatory breach by the party trying to terminate. Take advice before serving any termination notice.
Other clauses worth checking
- Limitation and exclusion of liability: caps on total liability and exclusions of indirect or consequential loss.
- Indemnities: promises to cover another party’s losses, which can go beyond ordinary damages.
- Health and safety (CDM 2015): who acts as principal designer and principal contractor, and, since October 2023, the equivalent roles under the Building Regulations dutyholder regime.
- Assignment and novation: whether rights can be transferred, and whether designers will be novated to a design and build contractor.
- Dispute resolution: adjudication, mediation steps, and whether final disputes go to arbitration or court.
General information, not legal advice. What applies to you depends on your contract, the facts and where the work is, and the law changes. Check the sources below and take advice from a qualified professional before acting on anything that matters.
Last updated: 15 October 2026
