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Liquidated Damages, Clauses & Injunctions to Prevent Delay

Bath and North East Somerset District Council v Mowlem PLC [2004] EWCA Civ 115 (20 February 2004)

As a result of this case (in the Court of Appeal), the fact that a building contract contains a provision for liquidated and ascertained damages ("LADs") does not necessarily prevent an employer from obtaining an injunction against a contractor to prevent further possible delay. Leaving the facts to one side, the court had to consider whether the LADs must be treated as an adequate measure of damages for delay for all purposes.

In the court's view, despite the presence of the LADs clause it could still not be assumed that the parties' agreement in this respect represented the full measure of loss that was likely to be suffered as a result of any delay. The court held that the parties may rather have been agreeing to limit the financial losses recoverable or may just have made a commercial decision to cover only certain easily quantified items of loss.

While saying it did not want to discourage people from agreeing to LADs, the court noted that assessing the totality of any likely loss before an event is bound to be a more "rough and ready and difficult exercise" than assessing a loss after the event. The upshot was that a court might be sufficiently lacking in confience about its own ability to fairly and adequately quantify damages after the event such that it would prefer to grant an injunction, as had occured in the lower court and which the Court of Appeal then upheld.

Clifford Chance, International Construction Newsletter
Summer 2004

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