Liquidated damages (LDs) are a daily dollar amount written into the contract that the contractor pays for each calendar day the project finishes past the contract substantial completion date. The intent is to compensate the owner for delayed occupancy without requiring the owner to prove actual damages (lost rent, lost business, etc.) in court. LDs typically run $500 to $5,000 per day on commercial work, with larger projects sometimes $10,000+ per day. Public works projects often have schedule-driven LDs because the consequence of late delivery is real public impact.
For LDs to be enforceable, the daily amount must be a reasonable estimate of the owner's actual damages from delay (not a penalty), the actual damages must be difficult to calculate, and the LD must apply only to delays that are genuinely the contractor's fault. Contractors often negotiate to cap total LDs at 10% to 25% of contract value. Excusable delays (owner-caused, force majeure) toll the LD clock; concurrent delay typically does not get LDs assessed against the contractor.