A contract specifies liquidated damages of $2,000 per day for delays beyond the 180-day completion date. If the project is completed on day 195 and the actual damages to the owner are $45,000, how much can the owner collect?
Correct Answer
A) $30,000
Liquidated damages are predetermined amounts that replace actual damages. The owner can collect $2,000 × 15 days = $30,000, regardless of actual damages being higher.
Why This Is the Correct Answer
Liquidated damages are contractually predetermined amounts that substitute for actual damages when delays occur. The contract specifies $2,000 per day for delays beyond 180 days. With completion on day 195, there are 15 days of delay (195-180=15). Therefore, the owner can collect exactly $2,000 × 15 days = $30,000. The actual damages of $45,000 are irrelevant once liquidated damages are established in the contract.
Why the Other Options Are Wrong
Option B: $75,000
This amount ($75,000) doesn't correspond to any calculation in this scenario. It's neither the liquidated damages ($30,000), the actual damages ($45,000), nor any combination of the two. Liquidated damages are an either/or proposition - you collect the predetermined amount or actual damages, never both combined.
Option D: $45,000
This represents the actual damages suffered by the owner ($45,000), but liquidated damages clauses replace actual damages with predetermined amounts. Once a valid liquidated damages provision exists in the contract, the owner cannot collect actual damages instead - they must accept the contractually specified amount of $2,000 per day regardless of whether actual damages are higher or lower.
Memory Technique
Remember 'Liquidated = Locked-in': Once liquidated damages are in the contract, the amount is locked-in regardless of actual damages being higher or lower.
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?
An indemnification clause in a construction contract typically requires the contractor to:
A property owner wants to convert a single-family home into a duplex in an area zoned for single-family residential use. The conversion meets all building codes but violates density requirements. What approval is needed?
As-built drawings are typically required to be submitted:
AIA Document A401 is primarily used for:
A general contractor is building a 12,000 square foot commercial warehouse. The building permit fee is calculated at $8.50 per $1,000 of construction value. If the project value is $2,400,000, what is the building permit fee?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass