What are the Notice periods for 'liquidated damages' LADS in a JCT Construction contract
Liquidated damages' LADS in a JCT Construction contract are deductions on a weekly basis for contract overrun. One would fall foul of the JCT Contract for making a deduction without going through the LADS process. And failing to pay a Certificate within time (usually 14 days) would entitle the Contractor to interest and may end up with the Contractor triggering the dispute mechanisms in the lease often 'Adjudication'.
Over-run issues are dealt with by LADS and are for triggered by the contract end date not being met, save for where it is altered (usually extended) by a time extension certificate. This could be triggered either by serving a Certificate of Non Completion - which may in law take the effect of calling an end to the contractor or by serving a Certificate of Practical Completion which sets the end date of the contract.
LADS are also triggered by a NOTICE REGARDING LIQUIDATED DAMAGES which ordinarily the Client is responsible for serving on the Contractor not the Contract Administrator. The pitfalls of a wrong notice are fatal - so a construction solicitor or experienced engineer should prepare such notice. Often the process for serving LADS is a TWO STEP process:
Step 1: WARNING NOTICE that you as Client (the Employer within the JCT Contract) may require payment of, or may withhold or deduct liquidated damages - which must be served before the due date for the final payment under the contract
Step 2: NOTICE DEMANDING PAYMENT OR DEDUCTING LADS at the rate stated in the contract particulars, no later than 5 days before the final date for payment of the amount payable under the contract
WARNING: The timing and sequencing of the notices is important and notices should be served in the correct order.
1. A Notice of Non-Completion is a prerequisite to the Employer's ability to deduct LADs. Failure to issue such a notice, or as the case of Octoesse v Trak [2016] EWHC 3180 (TCC) illustrates that to issue a fresh Notice of Non-Completion where an extension of time fixes a new Completion Date, can prevent the Employer being able to deduct LADs.
2. Typically the JCT does not specify an interval or time period between the warning notice and the deduction notice.
3. Both can be served almost simultaneously - as the case of Grove addressed the length of time required before service of the deduction notice and held that despite it being seconds between serving a Warning Notice and the Deduction Notice - this was not a defence.
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