The Supreme Court has overturned a Court of Appeal decision which held that a clause providing for liquidated damages for delay did not apply where the contractor had failed to complete the contracted work: Triple Point Technology, Inc. v PTT Public Company Ltd [2021] UKSC 29.

The Supreme Court’s decision restores the orthodox interpretation of liquidated damages clauses in the event that a contract is terminated before works are complete, ie liquidated damages accrue until the contract is terminated, after which the employer may be entitled to general damages arising from termination.

This was so despite the wording of the clause in this case which stated that liquidated damages were payable from the due date for delivery up to the date the employer accepted the work. The Supreme Court found that, on its proper interpretation, this language did not mean the contractor was relieved from the liability to pay liquidated damages where the works were not completed (and accepted). Rather, it meant that liquidated damages were payable “up to the date (if any)” that the work was accepted.

Nonetheless, as the interpretation of any contract will turn on its own wording in the relevant context, contracting parties may still wish to provide expressly for the effect of termination on liquidated damages, and/or to consider clarifying any liquidated damages provisions that are similarly worded to those in Triple Point.

For more information, see our Construction Disputes team’s e-bulletin on the decision.