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That is the practical answer to what happens if LADs are struck down. The result is not a windfall for either side: the contractor may still face a substantial claim, while the employer loses the evidential shortcut that an enforceable LADs clause provides. This article addresses construction contracts governed by English law, generally in the England and Wales context.
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What an unenforceable LADs clause changes
LADs are a sum agreed in the contract to compensate the employer for a specified breach, commonly delay in achieving completion. Where the clause is enforceable and applies on its wording, the employer claims the predetermined amount. It does not have to prove that its actual loss came to exactly that figure.
A finding of unenforceability removes that agreed route. The stated rate is not converted into an automatic debt, and the employer cannot simply invoice the contractor for the contractual amount as though the clause remained effective. The court instead considers any available claim for damages at common law.
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That claim is assessed by reference to the employer’s proved loss. The figure may be higher or lower than the former LADs rate, or there may be no recoverable loss if the evidence does not establish one. A contractor therefore does not become immune from delay consequences merely because the LADs mechanism has failed.
LADs and general damages: the distinction
| Issue | Liquidated and ascertained damages | General damages |
|---|---|---|
| What must be established? | An enforceable clause, a breach covered by its wording, and compliance with any contractual conditions such as notice or certification. | A breach, identifiable actual loss, and a causal connection between the breach and that loss. |
| How is the amount assessed? | By the predetermined contractual rate or formula. | By the loss proved on the facts of the dispute. |
| Does the employer prove the exact loss? | Not the exact amount represented by the agreed rate when the clause is enforceable. | Yes. The employer must quantify the loss it says the breach caused. |
| What additional controls apply? | The clause’s wording, applicable delay period, notices, certificates, extensions of time and any rules governing its operation. | Remoteness, reasonable mitigation and any reduction for the employer’s contribution to the loss. |
| What happens if the mechanism fails? | The agreed sum is not automatically payable. | A factually supported claim may continue, but recovery is not guaranteed. |
The two routes should not be blended. An employer cannot use the LADs rate as proof that the same amount was actually lost, and a contractor cannot assume that defeating the clause defeats every claim arising from the breach.
What the employer has to prove in a general-damages claim
1. The contractual breach
The employer must identify the obligation that was breached, such as an obligation to complete by a contractual date. The analysis may involve extensions of time, sectional completion, access obligations, design responsibility or other terms that determine whether the contractor was actually in breach and for what period.
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Evidence must show what the employer lost rather than merely restating the agreed LADs figure. Depending on the project and the pleaded case, relevant material might include records of additional finance costs, extended site or professional-team costs, extra accommodation or temporary-facility expenditure, lost operating income, or other expenses said to result from late completion. The categories must be tied to the contract and the facts; a broad assertion that the project was inconvenient is not a quantified damages case.
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3. Causation
The employer must connect each claimed item to the contractor’s breach. If several events delayed the works, the evidence should distinguish contractor-responsible delay from employer changes, third-party events, concurrent causes or periods for which an extension of time was due. A cost incurred during the same calendar period as delay is not automatically caused by that delay.
4. Remoteness
Even a real loss may be unrecoverable if it is too remote. The court asks whether the type of loss falls within the consequences for which the contract-breaker can fairly be held responsible on the applicable legal test. Unusual or particularly consequential losses require careful analysis of the contract’s allocation of risk and the circumstances known when the agreement was made.
5. Mitigation
The employer must take reasonable steps to limit avoidable loss. That does not require every conceivable measure or an action that would be commercially unreasonable. It does mean that evidence should explain decisions such as resequencing work, arranging temporary premises, obtaining substitute services, or accepting a practical alternative completion plan. Loss that reasonable action could have avoided may be reduced.
6. The employer’s own contribution
If the employer contributed to the loss—for example, by failing to provide information or access that affected progress—the recovery may be reduced. The precise effect depends on the facts and the contractual framework. Responsibility should therefore be analysed event by event rather than assumed from the existence of a late-completion date.
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Why a construction LADs provision may be unavailable
A clause is not unenforceable merely because a contractor challenges it. The parties must identify the particular defect and read the whole contract, including delay, notice, certification, extension-of-time, waiver, prevention and termination wording.
Uncertainty or defective operation
If the rate, trigger, period or calculation method is too uncertain to operate, the employer may be unable to establish what sum the clause requires. Definitions, sectional dates, milestones and the interaction between completion certificates and practical completion can all matter. A court will construe the contract before concluding that the mechanism is unusable.
Failure to satisfy a condition or procedural requirement
Some contracts require a notice, delay assessment or certificate before LADs can be deducted or claimed. Missing a condition precedent, serving a notice late, or relying on a certificate that the contract does not recognise can prevent use of the clause even where delay occurred. The consequence depends on the wording: a procedural failure may affect entitlement under the clause without deciding the underlying breach or a separate damages claim.
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Waiver or estoppel
An employer’s statements or conduct may affect whether it can insist on strict contractual rights. For example, a course of dealing around revised dates or deductions may be relied on as a waiver or estoppel. The evidence must show what was said or represented, how the other party relied on it where required, and whether the contract allowed the position to be withdrawn.
Prevention and time becoming at large
If the employer’s conduct prevented completion by the contractual date and the contract does not provide an effective extension-of-time response, the date may cease to operate as a fixed LADs trigger and time can become “at large”. That is a fact-sensitive contractual analysis, not an automatic consequence of every employer-caused delay. It may remove the basis for applying a fixed delay rate while leaving other rights and obligations to be determined under the contract and common law.
Penalty
A clause can also be challenged as a penalty. The Supreme Court test described in commentary on Cavendish Square Holding BV v Makdessi asks whether the detriment imposed is “out of all proportion to any legitimate interest of the innocent party” in enforcing the primary obligation. The inquiry is not a simple comparison between the rate and a later estimate of loss. It examines the legitimate interest protected and the clause’s substance and operation. A court must decide the actual clause and commercial context; not every high rate is a penalty, and not every failed clause fails for that reason.
How to handle a challenge in a live project dispute
- Identify the alleged breach and dates. Set out the contractual completion obligation, relevant milestones, extensions of time, actual completion or termination date, and the period said to be compensable.
- Map the LADs machinery. Check the rate or formula, trigger event, notice and certificate requirements, deduction provisions, caps, sectional arrangements and any clause dealing with concurrent or employer-caused delay.
- Test the alleged defect. Decide whether the argument concerns uncertainty, a missed condition, waiver or estoppel, prevention, penalty, or another construction point. Keep separate arguments separate; a procedural failure does not prove that the rate is a penalty.
- Preserve the general-damages case. Gather contemporaneous records of expenditure, financing, income, temporary arrangements, correspondence and decisions taken to limit loss. Do not rely on the LADs schedule as a substitute for proof of actual loss.
- Separate causation periods. Build a delay and cost analysis that distinguishes contractor-responsible events from employer changes, access problems, third-party events and periods covered by extensions of time.
- Review contractual notices and reservations. Check whether claims, certificates, extensions, termination notices and deductions were issued in the required form and time. Also check whether conduct may have changed the parties’ positions through waiver or estoppel.
- Quantify and challenge mitigation. Present each head of loss with its calculation and supporting records, then identify reasonable alternatives the employer did or did not pursue. This is where a general-damages claim is won or reduced in practice.
Termination: keep the LADs question separate
Termination creates a further interpretation issue: whether LADs accrue for pre-termination delay, and what happens to the clause after the contract ends. The United Kingdom Supreme Court addressed that interaction in Triple Point Technology Inc v PTT Public Company Ltd (2021 UKSC 29, judgment 16 July 2021).
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In a terminated project, read the actual wording governing the LADs period, completion, termination and accrued rights. Ask separately: what delay occurred before termination; what sums, if any, had accrued under the clause; what rights were preserved or ended on termination; and what loss is claimed after termination under a different contractual or common-law route.
Illustrative analysis of a delay claim
Assume an employer alleges that a building was completed late and the contract’s LADs clause is held unenforceable. The employer cannot simply multiply the alleged delay days by the former rate and present that product as the award. It would instead assemble evidence of the additional costs and income consequences that actually followed the late completion.
The contractor could test whether the claimed period includes employer-responsible delay or time for which an extension should have been granted. It could challenge whether financing or operating losses were caused by the breach, whether unusual losses were too remote, and whether the employer could reasonably have reduced the impact through temporary arrangements. The court would then assess the proved and legally recoverable loss, not the abandoned contractual formula.
Practical checklists for each party
Employer
- Preserve the executed contract, amendments, programmes, notices, certificates, payment records and completion evidence.
- Prepare a contemporaneous chronology separating contractor delay from employer instructions, access issues and other events.
- Quantify every head of actual loss and retain invoices, ledgers, financing records and income evidence supporting it.
- Record mitigation decisions and the commercial reasons for accepting or rejecting alternatives.
- Analyse remoteness, causation and contribution before pleading a general-damages figure.
- Check whether termination or other contract events changed the period for which any LADs right accrued.
Contractor
- Identify the precise basis on which the LADs clause is challenged rather than treating every defect as a penalty.
- Check notice, certificate, waiver, estoppel, prevention and extension-of-time arguments against the complete contract record.
- Test the employer’s delay analysis for concurrent causes, employer-responsible events and periods outside the clause.
- Request proper particulars and documents for each alleged head of general loss.
- Challenge remoteness, causation, avoidable loss and any contribution by the employer.
- For a terminated contract, analyse accrued pre-termination rights separately from future or post-termination losses.
Common mistakes to avoid
- Assuming the agreed rate survives. An unenforceable clause does not create an automatic entitlement to its stated amount.
- Assuming the contractor is free of liability. General damages can remain available if breach, causation and actual loss are proved.
- Calling the LADs rate “the loss”. The rate is evidence of a contractual allocation only while the clause operates; it is not proof that the same amount was actually suffered.
- Ignoring contract procedure. Notices, certificates, extensions and termination wording can determine whether the clause applies.
- Using a broad rule from a different case. The result in Triple Point depended on the contract before the Supreme Court and should not replace construction of the clause in issue.
- Failing to distinguish legal questions. Uncertainty, penalty, prevention, waiver and termination raise different issues and require different evidence.
Bottom line for an English construction contract
When a liquidated damages clause is unenforceable, the employer loses the certainty of the agreed remedy, not necessarily the right to seek compensation. A general-damages claim may succeed only to the extent the employer proves actual, caused and legally recoverable loss, after accounting for remoteness, mitigation and its own contribution. The contract’s notice, extension-of-time and termination provisions can decide whether any LADs entitlement existed in the first place, while the precise wording remains central to the outcome.
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