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-   -   Liquidated Damages for subs (https://www.contractortalk.com/f11/liquidated-damages-subs-131781/)

kasper86 03-06-2013 08:10 AM

Liquidated Damages for subs
 
Hi,

I run a company that specializes in insurance repair work. Occassionally, property management companys will have us sign their contracts that include penalties if we don't complete the project by a specified date.

The owners of my company want me to penalize our subs or suppliers if they don't meet a pre-determined deadline. Does anybody on the forum have something like this in place. OR are you a sub that works for contractors that do this?

I'll appreciate your feedback.

KR

greg24k 03-06-2013 09:40 AM

Some will add these Time Of The Essence clause to the contract...

What it basically means that the performance by one party to the contract at a specified location, date and time is required in order to require performance by the other party to the contract, and a failure to perform by the time specified will be a breach of the contract...

Which basically means you screwed and it will cost you, if you not finished on time, even if its a day late, it will cost you...

Therefore not many companies out there will strap themselves to pull that wagon, because there is to much to lose... and if you do find someone, the bid most likely be higher then usual, because companies add so many X days to cover themselves.

With that said, and that goes to people who just starting out and do sub-work... sometimes when you bid certain jobs, you have to pay close attention to what you sign and watch for these clause, and other in place.
In some cases HO put these clause in their contract, and when they get high bids because of this... they play this bids on to others, to get lower price. If a contractor who beats all the prices, signs a contract not realizing there is such clause in place... you can lose your shirt on a nice size job.

r4r&r 03-06-2013 10:26 AM

My contract specifies just the opposite. It spells out that it is not a TOE contract and there are no penalties or time frames to be met. I will provide a completion date range but that is as close to locking me down on a date as you are going to get. There are way too many variables for me to consider a TOE gig.

svronthmve 03-06-2013 03:03 PM

My contract says that both of us realize that TOE and work will be completed in a timely manner. But I neither specify start or end dates or expected project length times. I've never had a customer question, or even bring it up as a matter of fact. They just want me! :laughing:

kasper86 03-06-2013 05:33 PM

I appreciate your replies. What started this whole thing was a job that time was of the essence to the owner of the property. We were held up by our truss supplier on a 40k order. It almost caused us to miss our deadline.

KR

TimberlineMD 03-06-2013 05:46 PM

Quote:

Originally Posted by greg24k (Post 1722761)
Some will add these Time Of The Essence clause to the contract...

What it basically means that the performance by one party to the contract at a specified location, date and time is required in order to require performance by the other party to the contract, and a failure to perform by the time specified will be a breach of the contract...

Which basically means you screwed and it will cost you, if you not finished on time, even if its a day late, it will cost you...

Therefore not many companies out there will strap themselves to pull that wagon, because there is to much to lose... and if you do find someone, the bid most likely be higher then usual, because companies add so many X days to cover themselves.

With that said, and that goes to people who just starting out and do sub-work... sometimes when you bid certain jobs, you have to pay close attention to what you sign and watch for these clause, and other in place.
In some cases HO put these clause in their contract, and when they get high bids because of this... they play this bids on to others, to get lower price. If a contractor who beats all the prices, signs a contract not realizing there is such clause in place... you can lose your shirt on a nice size job.

Courts have ruled that these 'one sided' clauses cannot be enforced.

If there are to be penalties for not performing on a time frame, then there must also be rewards for bringing the job to conclusion before the time is up.

Also, the rewards have to be of the same value as the penalty.

tedanderson 03-06-2013 06:37 PM

Any time I am presented with a "Time of Essence" clause, I always demand that a delay clause is added to the contract.

For instance, if I am contracted to install phone and network jacks in an office build-out and I am required to be done no later than the 21st of next month, if the walls aren't framed up or finished by a certain date, then I can't be penalized for not finishing on time.

Essentially I am protecting myself from being penalized for not wiring up a wall that does not exist.


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