What is liquidated damages in a construction contract?

Liquidated damages in construction contracts are pre-agreed penalty amounts that contractors must pay for each day a project runs past the completion deadline - a crucial protection for Ottawa homeowners dealing with delayed renovations.

In Ontario construction contracts, liquidated damages clauses establish a specific dollar amount (like $100-500 per day) that the contractor owes you if they don't finish on time. This protects you from having to prove actual financial losses from delays, which can be difficult and expensive to calculate.

How Liquidated Damages Work in Ottawa Projects

When you're hiring contractors in Ottawa, liquidated damages give you leverage against timeline delays. Instead of arguing about whether a two-week delay cost you money, the contract already specifies the penalty. For example, if your kitchen renovation contract includes $200/day liquidated damages and the project finishes 10 days late, the contractor owes you $2,000 - regardless of whether you can prove specific losses.

The key requirement under Ontario law is that the liquidated damages amount must be a reasonable estimate of potential losses, not an unfair penalty. Courts will enforce reasonable amounts but may reduce excessive ones. For typical Ottawa home renovations, $100-300 per day is generally considered reasonable, while $1,000+ per day might be seen as punitive.

What to Include in Your Ottawa Contract

When working with contractors in the Ottawa area, ensure your contract specifies the exact completion date, what constitutes "substantial completion," and the daily liquidated damages rate. The clause should also outline valid excuses for delays (like City of Ottawa permit delays, weather for exterior work, or owner-requested changes).

Be aware that contractors may increase their base price if you insist on liquidated damages clauses, as they're taking on additional risk. However, for time-sensitive projects - like kitchen renovations before holidays or bathroom work before guests arrive - this protection is often worth the cost.

Red Flags and Protection Tips

Watch out for contractors who refuse to include any completion timeline or penalty clauses in their contracts. Legitimate Ottawa contractors understand that homeowners need schedule certainty. Also be wary of contracts with liquidated damages that only flow one direction - fair contracts often include provisions where you owe penalties for delays you cause (like late material selections or change orders).

Before including liquidated damages in your contract, verify your contractor through the City of Ottawa's building permit system and confirm their WSIB clearance at wsib.ca. A contractor who's properly licensed and insured is more likely to honor contractual obligations.

For complex projects requiring multiple permits through ottawa.ca/building, discuss how permit delays will be handled - these are typically excluded from liquidated damages since they're beyond the contractor's control.

For expert guidance on construction contracts and finding reliable contractors in Ottawa, check our verified contractor directory at ottawaconstructionnetwork.com/directory.