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Ask Buachaill Your Own Question
Buachaill
Buachaill, Barrister
Category: Republic of Ireland Law
Satisfied Customers: 11924
Experience:  Barrister 17 years experience
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You are assisting a client in contract/tender preparation.

Customer Question

You are assisting a client in contract/tender preparation. The client wishes to include a liquidated damages provision in the contract so as to ensure the contractor finishes on time. The client wishes to call it a penalty charge in the contract. The client is unsure of the mount to levy and suggests that an overall figure of 15% of the contract value be included. The client wishes to avail of phased completion (per floor) as he is constructing a three storey building with three apartments on each floor. A contractor is appointed and works commence. The relationship turns sour and the project suffers from delay.
1) What are the legal ramifications of using the term ‘penalty charge’?
JA: What state are you in? It matters because laws vary by location.
Customer: Dublin
JA: Has anything been filed or reported?
Customer: no
JA: Anything else you want the Expert to know before I connect you?
Customer: i have more questions
Submitted: 14 days ago.
Category: Republic of Ireland Law
Expert:  Buachaill replied 14 days ago.

Hello, and thank you for your question. I am your Expert and I will provide the answer you require.

Expert:  Buachaill replied 14 days ago.

1. There are no legal ramifications for designating the clause a "penalty clause". Instead the law looks to the substance of the clause to determine whether it is lawful or not. So long as the overall figure of 15% of the contract value is a genuine pre-estimate of the loss which is to be suffered from the delay, then the clause will be upheld. Be aware additionally that courts generally have a tendency to uphold these sorts of clauses in building contract cases so the chances of getting a modest clause of this nature struck down are not high. So, in essence, 15% of a contract value is not such a high figure to amount to being struck down, as it is not large in the context of the overall contract.

Expert:  Buachaill replied 14 days ago.

2. Thank you for using the website. If you require clarification, I will be happy to help. Please Rate or Accept the answer as unless you do so your Expert will not receive payment from the website despite answering your question.