An issue that continues to bedevil the construction industry is whether general damages are recoverable when the parties agree that liquidated damages are not. In a typical scenario where this issue arises, the parties will have agreed that liquidated damages are not payable if the contractor is late in performing its works by striking out the liquidated damages clause in a standard form, or by stating that the rate of liquidated damages is "nil", "£0" or "n/a". By doing this, are they implicitly agreeing that the employer is also unable to recover general (or unliquidated) damages, i.e. damages that the employer proves that it actually suffered due to the contractor's delay?

In one case last year from Western Australia, the court upheld an arbitrator's finding that general damages were recoverable where liquidated damages were stated to be "n/a". There has been another recent case where the Court of Appeal of Western Australia reached a similar conclusion.


A builder entered into a standard form lump sum building contract with a proprietor to construct a brick house. The contract stated that the builder would not be responsible for delays in commencing or completing the works over which the builder had no control. Additionally, the contract stated that the builder "shall be liable to pay the Proprietor liquidated damages at the rate of NIL DOLLARS ($00.00) per day for each day beyond practical completion until practical completion is deemed to have taken place".


The court held that while there was a clear intention that liquidated damages did not apply, on the proper construction of the contract the court was unable to find a clear and unambiguous intention to exclude the common law right to damages. The fact that the parties did not intend liquidated damages to apply did not mean they also intended that general damages should be irrecoverable.

Comment and Commercial Implications

  • This Australian decision may be contrasted with the most prominent English case on point, the decision of the Court of Appeal in Temloc v Errill (1987), in which the insertion of "£nil" in the appendix in relation to liquidated damages was held to exclude both liquidated and unliquidated damages. The approach that all courts have taken to the question of whether general damages are recoverable is to look at the words of each particular contract, in an attempt to divine the intentions of the parties. By taking this approach, different results may be yielded according to the facts.
  • However, the common feature of most of these cases is that when the parties provide that liquidated damages are "nil", "£0" or "n/a", or they strike out a liquidated damages clause, they usually haven't turned their minds collectively to the issue of whether general damages should be recoverable even though liquidated damages are not. A further complication is that the contract will often give no real indication either way of what the parties actually intended (even if they had a common intention).
  • How can the courts resolve this dilemma? The approach taken in the most recent case from Australia takes an attractively simple approach, i.e. if the parties have not expressly excluded the general right at common law to recover unliquidated damages for delay, the presumption is that that right persists. This approach may help to avoid getting into (intractable) difficulties over what the parties really meant, and effectively casts the burden on the contractor to demonstrate that the parties intended a different meaning (i.e. that general damages would not be recoverable).
  • What is the lesson for parties negotiating a contract? If you don't want liquidated damages to apply, and you don't want general damages to be recoverable, your contract needs to spell this out, otherwise there is a real risk of a court (or an arbitrator or adjudicator) deciding that general damages may be recovered for contractor delay. Simply stating that liquidated damages are "nil", "£0" or "n/a", or striking through the liquidated damages clause, is not enough because it creates an ambiguity.

Reference: J-Corp Pty Ltd v Mladenis [2009] WASCA 157

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The original publication date for this article was 14/10/2009.