Liberty Mercian Ltd v Dean and Dyball Construction Ltd [electronic resource]

[2008] EWHC 2617 (TCC), 31 October 2008. Case considers whether a construction building planning was workable and whether it gave rise to a penalty. Liberty Mercian Ltd (L) contracted with Dean and Dyball Construction Ltd (D) for the construction of a retail project. This project was divided into five sections, the start of phases two to five following the completion of the previous one. D fell behind schedule and was eight weeks late for the completion of section 1. Extension of four weeks for each section of the project was awarded. The contract made provision for liquidated damages per week of delay for each section. Because of the delay in the first section, all the other sections were four weeks delayed and incurred the relevant liquidated damages. D argued that the liquidated damages were equivalent to a penalty at each stage of the project and should be set aside. "Held": The judge considered that the liquidated damages were not a penalty as it was clear that this contract was based on sequential completion of construction works and that delay on one section would automatically bring delay of the same amount of time on the following sections. The difference in the amount of liquidated damages due for each section was a proof that they were a genuine pre-estimate of specific loss.