Liquidated damages in the UAE

International contractors from common law jurisdictions will be familiar with the concept of liquidated damages. A typical clause will provide that should the contractor fail to complete by a date stipulated in the contract, or any extended date, he shall pay or allow the employer to deduct liquidated damages at the rate of ‘X’ per day, or week, for the period during which the works remain uncompleted.

Where the contractor has failed to complete by the scheduled completion date, he will be liable to a claim for liquidated damages either by way of action, by deduction or by a set-off. There can be no inquiry into the actual loss suffered. The advantage to an employer is that he will not need to prove the loss suffered. The most common default by a contractor that will give rise to a claim for liquidated damages is a failure to reach completion or to achieve specific milestones…

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