Can a main contractor deduct LADs without proving direct subcontractor delay?

No. Under standard unamended JCT subcontract conditions, the main contractor must establish that the subcontractor was the actual and direct cause of critical path delay to the project completion date.

What clause governs extension of time claims under standard JCT subcontracts?

Clause 2.26 of the JCT Subcontract Conditions governs the notification of delay, and Clause 2.27 sets out the Relevant Events that entitle a subcontractor to a fair extension of time.

Should a subcontractor accept unlimited delay damages in their contract?

No. Subcontractors should negotiate an explicit financial cap on liquidated or general damages, typically capped at 5 percent to 10 percent of the total Subcontract Sum.

Can a main contractor deduct LADs without proving direct subcontractor delay?

No. Under standard unamended JCT subcontract conditions, the main contractor must establish that the subcontractor was the actual and direct cause of critical path delay to the project completion date.

What clause governs extension of time claims under standard JCT subcontracts?

Clause 2.26 of the JCT Subcontract Conditions governs the notification of delay, and Clause 2.27 sets out the Relevant Events that entitle a subcontractor to a fair extension of time.

Should a subcontractor accept unlimited delay damages in their contract?

No. Subcontractors should negotiate an explicit financial cap on liquidated or general damages, typically capped at 5 percent to 10 percent of the total Subcontract Sum.

JCT Liquidated Damages (LADs) Explained for Subbies

What are Liquidated and Ascertained Damages (LADs) in JCT Contracts? Liquidated damages are fixed, pre-agreed financial sums deducted by the contractor if a subcontractor fails to complete their works by the contractual completion date. To be legally enforceable, the rate must represent a genuine pre-estimate of loss rather than an arbitrary penalty.

When a commercial project runs behind programme, main contractors will look for someone to carry the financial hit. If you’re the trade contractor on site when the handover deadline slips, they will try to pass thousands of pounds in delay penalties straight onto your account.

Liquidated and Ascertained Damages (LADs) can destroy a subcontractor’s cash flow overnight. Understanding how these deductions work under UK construction contracts is your first line of defence against unlawful set-offs and severe revenue loss.

The JCT Demystifier: Liquidated Damages (LADs) Explained

Technical Authority: JCT Standard Building Sub-Contract (SBCSub) and Design and Build Sub-Contract (DBSub) Clause 2.29 (Liquidated Damages / Delay Payments) and Clause 2.26 (Notice of Delay / Relevant Events), governed by Section 111 of the Construction Act 1996.

Plain English Translation: Liquidated damages are a pre-agreed, fixed daily or weekly rate written into the contract to compensate for late completion. Under a standard JCT subcontract, the main contractor cannot simply deduct these sums on a whim. They must prove that your specific trade scope directly caused critical path delay to the overall completion date, and they must formally serve a timely Pay Less Notice setting out the basis of the calculation before deducting a penny.

Loss Aversion & Financial Risk: If you fail to submit a written Clause 2.26 delay notice the moment other trades or site events hold you up, the main contractor can reject your Extension of Time (EOT) claim. They can then deduct full LAD rates,often £5,000 to £25,000 per week,straight from your monthly interim valuation, wiping out your margin and causing catastrophic revenue loss.

3 Essential Rules to Defend Against Subcontract Delay Deductions

Issue Clause 2.26 Delay Notices Immediately: The moment you’re delayed by lack of site access, late design details, or preceding trades, issue a formal written notice naming the Relevant Event and outlining the expected delay to your subcontract period.
Spot the “Condition Precedent” Time-Bar Trap: Watch out for bespoke contractor amendments to Schedule 2 requiring notice within 5 to 7 days. If you miss that window by 24 hours, you lose all legal entitlement to an Extension of Time.
Enforce Statutory Pay Less Notice Rules: A main contractor cannot withhold delay deductions via an informal email. Under the Housing Grants Act, they must serve a formal Pay Less Notice specifying the exact sum withheld and the contractual ground for the calculation.

Frequently Asked Questions About JCT Liquidated Damages

Can a main contractor deduct liquidated damages without a Pay Less Notice?

No. Under Section 111 of the Construction Act 1996 and standard JCT subcontracts, any deduction or set-off for liquidated damages must be formally notified in a compliant Pay Less Notice specifying the exact sum and basis of calculation before the final date for payment.

What happens if I miss the delay notice deadline in an amended JCT contract?

If the subcontract amends Clause 2.26 to make notice a “condition precedent”, missing the deadline (typically 5 to 14 days) completely bars your claim for an Extension of Time, leaving you contractually liable for project delay costs even if the main contractor caused the holdup.

Are unliquidated damages different from LADs in JCT subcontracts?

Yes. Liquidated damages are pre-fixed rates agreed in the contract particulars (e.g. £2,500 per week). Unliquidated damages require the main contractor to provide evidence of the actual financial losses incurred as a direct result of your specific breach.