Surviving flow-down liability for liquidated damages: a guide for subcontractors

Liquidated damages (“LD”) clauses are a common measure for an employer to mitigate against delays caused by the main contractor. This same clause is often featured in subcontracts – they minimize the main contractor’s exposure to liability for delays caused by the subcontractor, and pass down the liability for LDs to the subcontractor. Unsurprisingly, LD clauses are one of the most common causes of disputes between main contractors and subcontractors as the payable amount can be quite substantial. This commentary will seek to explain the potential liability of a subcontractor for LDs arising from delays, and consider possible defences to be raised.