ABSTRACT
Most construction contracts contain clauses entitling the employer to an agreed sum described as liquidated damages for each day or week of delay beyond a specified completion date. The law of England relating to penalty clauses has recently been reviewed by the Supreme Court in two appeals heard together. In English law there is no middle ground between a clause that operates as a penalty and a clause that is held not to be a penalty. Under English law the question of whether a clause is penal is decided by considering the clause at the time of contract. The existence of liquidated damages clauses gives rise to an important legal principle, often referred to as the prevention principle. In order to enable the employer to perpetrate acts of prevention yet still maintain a fixed completion date and entitlement to deduct liquidated damages, the employer may extend time for completion for specified events for which the employer would otherwise be liable.
