August 19, 2013. Many construction contracts, particularly contracts related to large commercial projects, include liquidated damages clauses which obligate a general contractor to finish a project by a specific date or pay liquidated damages of, e.g., $1,000 per day until the project is finished. The purpose of such contractual provisions is, of course, to put pressure on the general contractor to finish the project in a timely fashion. General contractors typically take efforts to insulate themselves from such provisions through their contracts with subcontractors.
A problem arises when a subcontractor is unable to finish its scope of work within the contemplated timeframe due to events beyond its control, such as delays “ahead” of them in the construction process. For example, a drywall subcontractor cannot hang drywall until the electrical work to be hidden behind the drywall is completed. While the drywall subcontractor is scrambling around the jobsite, working on various rooms while the electrical work is completed in other rooms, the subcontractor should be creating a paper trail to protect itself from a “delay” claim involving liquidated damages. The subcontractor should keep daily project log notes. It should document the work it did each day and outline the reasons it was unable to work on specific portions of its work. The same concept applies to a general contractor.
In a “delay” dispute seeking substantial liquidated damages, a contractor with well-documented project notes which explain the delays occurring on the project - as they are actually occurring - is going to be in a much stronger position that a contractor who failed to document the project’s progression. A couple of minutes per day can help a contractor avoid significant liability, especially on jobs which implicate liquidated damages clauses. However, it is also a good practice to take daily project notes regardless of the size of the project or the presence of liquidated damages clauses because, even in the absence of such clauses, an owner might seek consequential damages stemming from construction delays, such as lost profits. Play it safe. Paper your file.