Issue of Penalties: How Much is Too Much?
Construction contracts are agreements that exist between contractors and their clients/project managers. Such agreements must adhere to the Construction and Contractual Laws of South Africa and would normally make provisions for a penalty clause. Such a clause will require the contractor to reimburse the client/project manager a pre-determined amount for the period over which the work remains incomplete after the scheduled time of completion has expired. The time of completion can also be extended in some cases. This brings us to the issue of penalties: How much is too much?
Enforcing a Penalty Clause: Advantage Employer
Damages for late completion of construction projects, in direct relation to the date set by the agreement, are usually liquidated once the contract is concluded. Late completion of construction contracts is one of the most common breaches that could give rise to the provisions of the penalty clause, and with COVID-19 and lockdown restrictions adding to delays in today’s industry, this could lead a contractor losing out. One of the biggest advantages for an employer in this situation is that the employer is entitled to the payable penalties without any signs of prejudice towards them. However, some employers choose to go above and beyond when given this role of power.
Staying Within Reason when Penalties are Enforced
As a contractor, when you are faced with penalties, it is highly recommended that you are clued up on your legal options and how to ensure that you are not taken advantage of. In the case of delayed contract completion, the agreement will stipulate the applied penalties, which would normally refer to the provisioned penalty clause, and that alone. Therefore, you need experts in Construction and Contractual Law to ensure that the client/project manager stays within their rights and does not apply additional penalties that are not permissible.
Allardyce & Partners Attorneys is your first choice for legal representation as a contractor/sub-contractor in the construction industry in South Africa. We offer comprehensive legal services to give you a fighting chance when faced with penalties during a contractual dispute. Please contact us today on 011 234 2125 or email us at enquiries@allardyce.co.za if you need our legal assistance.
