Parties to a construction contract need to be very
careful when completing contracts in relation to liquidated
damages, particularly where it is not intended that liquidated
There have been a number of cases recently where contractors
have argued that the insertion of 'Nil' or 'N/A' by
the parties means that the principal is unable to recover anything
from a contractor for late completion. The argument is that the
principal has effectively excluded its rights in relation to time
claims altogether by completing the contracts in this way.
The recent decision of the Western Australian Court of Appeal in
J-Corp Pty Ltd vMladenis  WASCA 157 has
reiterated the fact that this issue does create uncertainty and
ambiguity and that parties should be clear in respect of either
preserving or excluding the common law right to damages for late
The appellant, J-Corp Pty Ltd (Builder),
entered into a building contract with the respondents
(Proprietor) for the construction of a three level
brick house for a lump sum of $311,484.12
(Contract). The Contract was a standard form of
contract prepared and used by the Builder.
Clause 11.9 of the Contract provided that, if the Builder failed
to reach practical completion by the due date, the specified rate
of liquidated damages available to the Proprietor was 'NIL
DOLLARS ($00.00) per day'. The parties agreed that there was no
communication or negotiation with respect to the inclusion of this
clause prior to entering into the Contract.
The Builder did not reach practical completion within the
specified period and the Proprietor commenced proceedings for
recovery of damages suffered as a result of the delay. The Builder
sought to rely on clause 11.9 to exclude any damages for delay. The
Builder failed at first instance and appealed.
The critical issue in the appeal was whether the primary judge
erred in finding that, on its proper construction, the Contract did
not exclude any entitlement of the Proprietor to claim unliquidated
damages. The essential question to be determined by the Court was
whether clause 11.9 excluded the Proprietor's right to claim
for damages at common law for losses suffered as a result of the
Builder's breach of Contract.
The Court commented that the principles to be applied in the
construction of a contract are well established and require the
Court to consider:
The common intentions of the parties;
What the reasonable person would understand the contract to
The surrounding circumstances known to the parties; and
The purpose and object of the transaction.
Upon consideration of the particular provisions of the Contract,
the Court was unable to find any clear words that expressed an
intention of the parties to exclude the Proprietor's
entitlement to unliquidated damages for delay. Further the Court
held that clause 11.9 did not constitute clear words to that
effect. In reaching this conclusion the Court dismissed the
Builder's submission that the insertion of 'NIL DOLLARS
($00.00)' demonstrated the intention of the parties to exclude
the entitlement of the Proprietor to any damages in the event of
It is important to ensure when drafting contractual clauses in
relation to time and liquidated damages that the parties are very
clear in relation to their agreement. The contract should deal very
clearly with liquidated damages in terms of whether they are to
apply and if they are not to apply whether the parties have
excluded the right to unliquidated damages.
This case reaffirms to the construction industry that the use of
'Nil' or 'Not Applicable' for liquidated damages
clauses in building contracts will not necessarily exclude a
party's right to common law damages.
DLA Phillips Fox is one of the largest legal firms in
Australasia and a member of DLA Piper Group, an alliance of
independent legal practices. It is a separate and distinct legal
entity. For more information visit
This publication is intended as a first point of reference and
should not be relied on as a substitute for professional advice.
Specialist legal advice should always be sought in relation to any
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