A contract includes liquidated damages of $1,000 per day with a maximum cap of $50,000. The project is 75 days late due to contractor delays. What is the total liquidated damages assessment?
Correct Answer
A) $50,000
Although 75 days late would calculate to $75,000 in damages ($1,000 × 75), the contract cap limits the maximum assessment to $50,000.
Why This Is the Correct Answer
The correct answer is A ($50,000) because liquidated damages clauses often include maximum caps to limit the contractor's exposure. Even though the mathematical calculation of 75 days × $1,000 per day equals $75,000, the contract specifically states a maximum cap of $50,000. Contract caps take precedence over calculated amounts, so the liquidated damages assessment cannot exceed the contractual maximum regardless of how many days late the project is.
Why the Other Options Are Wrong
Option B: $75,000
Option B ($75,000) represents the raw mathematical calculation of 75 days × $1,000 per day, but this ignores the contractual maximum cap of $50,000. Contract terms always govern over simple calculations, and caps are specifically designed to limit exposure beyond the calculated amount.
Option C: $25,000
Option C ($25,000) has no basis in the contract terms or calculations provided. This amount doesn't correspond to any logical interpretation of the liquidated damages clause, daily rate, number of late days, or maximum cap.
Option D: $1,000
Option D ($1,000) only represents the daily rate for liquidated damages, not the total assessment for 75 days of delay. This would only be correct if the project were exactly one day late and no cap applied.
Memory Technique
Remember 'CAP WINS' - when liquidated damages calculations exceed the contractual cap, the Cap Always Prevails With Insurance/protection for contractors
Reference Hint
Florida Building Code Chapter 1, Section 107 - Construction Documents and Contract Administration
More Contract Admin Questions
A project experiences a 30-day delay due to unusually severe weather. The contract includes a liquidated damages clause of $1,000 per day for delays. If the weather delay is excusable but not compensable, what liquidated damages apply?
A commercial project requires a total of 12 inspections. The building department charges $85 per inspection for the first 5 inspections, $65 for inspections 6-10, and $45 for any additional inspections. What is the total inspection fee?
What document must be posted at the job site before a Certificate of Occupancy can be issued for a commercial building?
A mixed-use development requires a variance for reduced setbacks. The property is located within 500 feet of a hospital. What additional consideration must be addressed?
A LEED project requires tracking of regional materials. Materials are considered regional if they are extracted, harvested, or recovered, as well as manufactured within what distance of the project site?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass
Previous Question
During a coordination meeting, the HVAC contractor states they need 2 additional days to complete ductwork, which will delay the drywall contractor. The project is already behind schedule. What is the best course of action?
Next Question
A contractor is deciding whether to purchase or rent a crane for a 6-month project. The purchase price is $285,000 with an estimated resale value of $195,000. Monthly operating costs are $3,200. The rental cost is $8,500 per month including maintenance. Which option is more economical?