Are liquidated damages enforceable in Canada?
Yes, if the stipulated amount is a genuine pre-estimate of the loss the owner expected from late completion. If the amount is extravagant compared to the greatest conceivable loss, it may be an unenforceable penalty. The Supreme Court has moved toward enforcing agreed sums unless they are unconscionable.
How are construction liquidated damages calculated?
They are the per-day rate stated in the contract multiplied by the number of days the contractor completes past the contract completion date, after accounting for any extensions of time properly granted. Many contracts also cap the total LDs at a percentage of the contract value.
Can I avoid liquidated damages with an extension of time?
Yes. If the delay was caused by the owner or an excusable event and you gave proper notice, you may be entitled to an extension of time that moves the completion date, reducing or eliminating the days on which LDs are assessed. Notice provisions are strictly applied.
What is the difference between liquidated damages and a penalty?
Liquidated damages are a pre-agreed, reasonable estimate of loss and are enforceable. A penalty is a sum set to punish or deter breach rather than compensate for loss, and courts will not enforce it beyond the actual proven loss.