- Jun 7, 2004
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Sorry I may have missed. Has there been anything official disclosure wise regarding penalties for delay ??
Last I read it was suggested that Mace were unlikely to have had a penalty clause include in the build contract, but that seemed to just be opinion.
Just wondered whether there has been anything concrete one way or the other.
Not that it's going to change anything, just intrigued to know what kind of sums we'd be looking at if applicable.
Penalties are illegal in building contracts. They have to be liquidated damages: a fair pre-assessment of how much the client will lose financially as a result of late completion. As you can imagine, on a project of this size, that's a lot of money. But it can't be a penalty, i.e., penal in nature or quantum. It has to be related to the additional costs of late completion.
We know that Mace have financial incentives for completing the project early, because it was publicised when they took on the job. Because of the short time scale for the build, there may even have been incentives to complete it on time. Normally, one would expect there also to be damages for late completion. I've never encountered a building contract without them. Whichever it is, or both, Mace will lose a lot of money as a result of these last-minute problems.
It won't end there. Mace will try to pass the losses on to the subcontractor at fault. If the problems resulted from defective materials, the subcontractor will try to pass the losses on to the manufacturer/supplier. And everyone will involve insurers. Most disputes of this nature, if they are as valuable and complex as this, end up in litigation.
In the meantime, THFC can sit on the money and refuse to release retention (the 2%-5% of a contract that is held back until defects have been rectified). But Mace and the other contractors will threaten to sue for the release of the retention.
Everyone's lawyers will end up with most of the money.