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Damages in Contracts 25 - 04 - 2013 EPC Workshop WVJ - 1
Damages in Contracts 25 - 04 - 2013 EPC Workshop WVJ - 1
IN
EPC CONTRACTS
5th Annual Senior Management Forum, Mumbai
April 26, 2012
William Vivian
John
Partner
Luthra & Luthra
Law Offices
TOPICS
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CONTRACT CLAUSES
Liquidated Damages
If the Contractor [fails to do x], he shall pay, Owner by
way of liquidated damages and not by way of
penalty, [amount].
The Contractor acknowledges that the liquidated
damages are reasonable and a genuine pre-estimate
of the loss and damage that will be suffered by the
Owner.
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CONTRACT CLAUSES
Limitation of Liability
The aggregate liability of the Contractor shall not
exceed a sum equal to the Contract Price, except for
[exceptions]
Neither party shall be liable to the other for any
indirect, remote, special, or consequential damages
provided, such limitation shall not apply to [carveouts]
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DAMAGES - PRINCIPLES
A. Compensation
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DAMAGES - PRINCIPLES
B. General v. Special
naturally arose, usual course (General damages)
parties knew to be likely (Special damages)
[Special circumstances, whether the party knew or not]
[Hadley v. Baxendale 1854]
Why? You need to know how far you will fall. Parties
should have opportunity to price risk while contracting
C. Loss of Profit?
[State of Kerala v. Bhaskaran AIR 1985 Ker 49]
Loss of profit can be reasonable forseeable consequence
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DAMAGES - PRINCIPLES
D. Caused: Actual Loss
No loss, no compensation. Cant bluff !
[Asiatic Steam Navigation AIR 1941 Sind 146]
no evidence of damages v. difficulty in
assessing damages
Plaintiff to prove his case but the court cannot
decline to estimate damage. Must look at all facts
and circumstances to get to a measure.
E. Duty to Mitigate
means to remedy the inconvenience
[Murlidhar Chironjilal AIR 1963 SC 332]
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E. Earnest Money
Nominal amount of being earnest to complete
the contract
If reasonable, can be forfeited
If not reasonable, treated under S.74
F. Time is of the Essence v. Liquidated Damages
S. 55 Contract Act
[Hind Construction Contractors (1979) 2 SCC 70]
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Liquidated Damages
Wording is important
[However, wording is not everything]
Specific breach
Limitation of Liability
Consequential damages specify
Is it enforceable?
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THANK
YOU!
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