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Liquidated damages and delay claims against subcontractors

When a project finishes late, the contractor may try to pass its losses, or the employer’s liquidated damages, down to its subcontractors. This guide explains what the contractor has to prove and how to defend a delay claim.

By Benjamin Bjork, BSc (Hons), LLM, FCIArb, construction claims consultant. Last reviewed 2 November 2026. About 5 minutes to read.

Liquidated or unliquidated damages?

Liquidated damages, often called LADs or LDs, are a fixed sum per day or week of delay agreed in the contract. Where they apply, the party claiming them does not have to prove its actual loss. Unliquidated damages are the actual losses caused by the delay, which must be proved.

Most subcontracts do not set liquidated damages. The contractor must then prove that you caused the delay and what that delay actually cost it. Check your subcontract, though: some bespoke subcontracts do include a daily or weekly rate.

What must the contractor prove?

  • Breach: that you failed to complete by the date or within the period the subcontract requires, as properly extended.
  • Causation: that your delay caused the delay to completion, rather than late access, late information, variations, other trades or the contractor’s own management.
  • Loss: what the delay actually cost it, such as extended site costs, or damages it has had to pay or allow to the employer.
  • Contract conditions: some subcontracts require a notice of failure to complete, or other steps, before delay damages can be claimed.

Can main contract liquidated damages be passed down?

A contractor can sometimes recover from a subcontractor the liquidated damages the employer has deducted from it, as a loss caused by the subcontractor’s delay. It must show that your delay caused the delay to completion of the main contract works, not just to your own work, and that the loss is of a kind the parties would reasonably have had in mind when the subcontract was made.

Where several subcontractors and the contractor itself all contributed to the delay, recovering the employer’s damages in full from one subcontractor is unlikely. Ask to see the employer’s notices and deductions, and any extensions of time the contractor has been given under the main contract.

Your extension of time is your defence

If you are entitled to an extension of time, delay within it is not your liability. Refer to your delay notices by date, and ask the contractor to carry out any review of the completion date the subcontract requires. If the contractor caused delay and the subcontract has no way of extending time for it, time may be “at large”, and the contractor cannot claim damages for that delay. See our extension of time guide.

Are liquidated damages ever unenforceable?

A liquidated damages clause is enforceable unless it is a penalty. Since Cavendish Square Holding BV v Makdessi [2015] UKSC 67, the test is whether the sum is out of all proportion to any legitimate interest of the party relying on it. In construction contracts negotiated between businesses, courts rarely find a rate to be a penalty. The stronger defences are usually time, causation and the contract’s own conditions.

Can delay damages be deducted from my payments?

Only through the payment rules. A contractor that wants to deduct delay damages from a payment due to you must give a valid pay less notice in time, stating the sum it considers due and how it is calculated. Without one, it must pay the notified sum and pursue its claim separately. See our guide to pay less notices.

Records that win delay disputes

Delay disputes are won on records. Keep your programme and every revision you receive, your delay notices and further particulars, progress records showing when each area was released to you, and a daily diary that records the progress of the building and other trades, not just your own work. A contractor that blames you for delay at the end of the job is far easier to answer when your records show, day by day, what was stopping you. See our guide to site records.

How should I respond to a delay claim?

  1. Reply promptly in writing, even if nothing has been deducted yet.
  2. Deny liability and set out the causes of delay that were the contractor’s responsibility, referring to your notices by date.
  3. State your position on extension of time, and ask for any review the subcontract requires.
  4. Ask for the contractor’s programme and progress records, the analysis showing the delay it says you caused, the main contract position, and its calculation of loss with the evidence.
  5. Do not admit any period of delay, or explain your own labour levels, unless the contractor has raised them, and then answer only what it has said.

If the dispute goes to adjudication over a payment, include a short paragraph in your notice of adjudication covering any delay deductions, so that the adjudicator must decide them too.

Questions

My subcontract has no liquidated damages clause. Can the contractor still claim for delay?

Yes, as unliquidated damages, but it must prove that you caused the delay and what loss it actually suffered as a result.

Can the contractor charge me the employer’s liquidated damages in full?

Only to the extent it proves that your delay caused the delay to the main contract and the resulting loss. If others, including the contractor, also caused delay, full recovery from you is unlikely.

Is a high daily rate of liquidated damages a penalty?

Not simply because it is high. The question is whether it is out of all proportion to the legitimate interest it protects, and challenges on that ground rarely succeed between commercial parties.

General guidance on the law of England and Wales, not legal advice. Last reviewed 2 November 2026.