“Take the Risk or Lose the Chance”.
In today’s video, we look at why you should limit risk in the construction industry, click here to view or continue with this quick read.
Do you know the difference between liquidated damages and consequential damages?
This is an important difference because it will impact your business and future success.
What are Liquidated Damages?
Basically, this comes down to reimbursing the client because you’re late on a job. Usually running late means the client has to pay other contractors to stay on longer until all the work gets done.
So in short, your delay has cost them because they’ve had to account for the snowball effect across the site.
What are Consequential Damages?
This is when you have to reimburse the client for loss of profit and revenue for not being able to operate as a business on time. So this could be things like a room or flat rentals, or sales income for not being ready by the due date.
If their loss of profit is so big, which it usually is, it could potentially bankrupt you.
So how do you avoid this?
The strategy is always to limit the damage.
Don’t sign up for consequential damages ever.
It’s too risky.
How do you navigate this?
Tell the client in a professional way that you never sign up for consequential damages or loss as a commercial principle.
The client knows how risky consequential damages are, but they always want to pass risk on to the contractor.
They’re taking a chance putting this in the contract so when you push back the majority of the time they will accept it and remove the clause.
Consequential Damages is one clause that’s not worth the risk.
Your focus should be on longevity, not making a quick buck that could result in losing everything.
Limiting downside and risk should be your main priority so rather take safer jobs with less risk than high-profit jobs with lots of risks.
For more contractual advice, Quantum Contract Solutions is here to guide and assist you through everything contract related. Let’s reduce risk in your contracts and save time and money, just click this link to get our FREE case study to show you how clients just like you are doing it.