FIDIC Liquidated Damages: How Sub-Clause 8.7 Delay Damages Work
The Interim Payment Certificate lands smaller than expected. Buried in the calculation is one line: delay damages, deducted at the daily rate in the Contract Data, running from a Time for Completion that passed six weeks ago. Nobody sent a notice. For a Project Manager seeing this for the first time, the question is always the same — is this even allowed without a claim? Here is what FIDIC actually calls "liquidated damages," how it is calculated and capped, when the Employer can apply it, and when the clause itself can be challenged.
What FIDIC Actually Calls "Liquidated Damages"
"Liquidated damages" is industry shorthand — it is not a defined term in the FIDIC Conditions of Contract. What the contract actually gives the Employer is Delay Damages: Sub-Clause 8.7 in the 1999 Red and Yellow Books, renumbered Sub-Clause 8.8 in the 2017 Second Edition.
The idea is the same either way. Rather than forcing the Employer to prove its actual loss every time completion runs late, the parties agree a fixed daily sum at tender stage and write it into the Contract. If the Works finish late, that sum applies automatically, no proof of loss required — the Employer skips litigating its loss, and the Contractor knows its maximum exposure for pure delay up front.
Key Takeaway: "Liquidated damages" and FIDIC's "Delay Damages" mean the same thing — Sub-Clause 8.7 under FIDIC 1999, Sub-Clause 8.8 under the 2017 Second Edition. A pre-agreed daily sum for late completion, in place of proving actual loss.
How the Amount Is Calculated and Capped
The mechanics are simple on paper. A daily rate, stated in the Appendix to Tender (1999) or the Contract Data (2017), is multiplied by the number of days between the Time for Completion — as extended by any Extension of Time the Contractor is entitled to — and the date on the Taking-Over Certificate. FIDIC does not set the rate; it is whatever figure the parties inserted at tender stage.
There is usually a ceiling too: the total payable cannot exceed the "maximum amount of delay damages (if any)" stated in the same appendix. A cap around 10% of the Contract Price is common practice, not a FIDIC default. If the field was left blank or deleted during negotiation, there may be no ceiling at all — worth checking before signing.
One more feature worth knowing: delay damages are stated to be the only damages due for late completion, other than on termination under Sub-Clause 15.2 — a valid clause replaces a separate general-damages claim, it does not sit alongside one.
Key Takeaway: Rate × days late, capped at whatever maximum figure sits in the Contract Data or Appendix to Tender. FIDIC prescribes neither number — check your own contract rather than assuming a 10% cap applies by default.
How and When the Employer Applies It
Delay damages are not billed separately — they are deducted through the Interim Payment Certificate process under Sub-Clause 14.6, reducing the net amount the Engineer certifies as due.
Under FIDIC 1999, the Employer's entitlement under Sub-Clause 8.7 has generally been treated as arising automatically once the Time for Completion passes without the Works reaching the relevant Taking-Over Certificate — not as an Employer "claim" requiring the same 28-day notice machinery the Contractor follows under Sub-Clause 20.1. The 2017 Second Edition changes this: Sub-Clause 2.5 (Employer's Claims) was removed, and the unified claims procedure at Sub-Clause 20.2 now applies to both Parties. The Employer must give notice of its claim to delay damages within 28 days of becoming aware of the entitlement, going through the same Engineer determination process a Contractor's claim would follow — missing that window is now a real risk on the Employer's side too.
Key Takeaway: Damages are deducted through the Payment Certificate, not billed separately. FIDIC 1999 treats the Employer's entitlement as largely automatic; the 2017 edition now requires the Employer to give its own 28-day notice, just like the Contractor.
When a Delay Damages Clause Can Be Struck Down
Calling a sum "liquidated damages" does not automatically make it enforceable. Courts have long policed the boundary between a genuine liquidated damages clause and a disguised penalty — a sum so large it exists to punish the Contractor into performing, rather than to compensate a genuine loss. The older English test asked whether the figure was a "genuine pre-estimate" of loss at signing; the modern test, set out by the UK Supreme Court in Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67, is broader — a clause is only unenforceable if it is out of all proportion to any legitimate interest the innocent party has in enforcing the other side's obligation. A rate with some rational relationship to the actual cost of delay will usually survive.
The consequence matters as much as the test: a struck-down clause does not fall back to a smaller "reasonable" rate, it disappears entirely, and the Employer must instead prove its actual loss through ordinary general damages. Challenging a delay damages clause is rarely the easy win it looks like from the Contractor's side.
Key Takeaway: A delay damages clause fails only if it is wildly out of proportion to the Employer's genuine interest in on-time completion — not merely because the number feels large. If it does fail, the Employer must prove actual loss instead, which can end up costing the Contractor more, not less.
Delay Damages and an Extension of Time — Not Opposites
A common misreading treats the delay damages dispute and the Extension of Time claim as two separate fights. They are usually the same fight, argued on the same facts. Delay damages only run from the current Time for Completion, and an EOT moves that date. Win an EOT covering the whole disputed period, and the damages tied to it should be reversed or credited back; win a shorter EOT than claimed, and damages still apply for the shortfall.
This is why the underlying EOT entitlement — the clause relied on, the awareness date, the cause-and-effect link to the programme — matters more than arguing about the daily rate itself.
Key Takeaway: Delay damages run from the Time for Completion, and an Extension of Time moves that date. A successful EOT claim for the disputed period reverses the damages tied to it — the two are the same argument, not two separate ones.
Disputing an Incorrect Deduction
If a Payment Certificate shows a deduction that looks wrong — an EOT already granted but not reflected, a mismatched rate, or a cap exceeded — respond in writing promptly; silence can be read as acceptance. Reference the certificate, state the correct basis, and ask for correction next time. If the Engineer disagrees, request a determination under Sub-Clause 3.5 (1999) / 3.7 (2017), then refer to the Board under Clause 20 (1999) or Clause 21 (2017).
Key Takeaway: Dispute an incorrect deduction in writing, tied to the specific Payment Certificate, with the correct basis stated. Escalate to an Engineer's determination and then the Board if it is not fixed in the next certificate.
Common Mistakes on Both Sides
Employers over-deduct by ignoring an EOT that later covers the same period, deducting past the stated cap, or applying damages for delay caused by their own default. Contractors lose ground by staying silent instead of disputing a deduction — an unchallenged figure becomes the baseline the next certificate builds on — and by fighting over the daily rate instead of the EOT entitlement that actually controls it. Miss the notice window on that underlying claim, and no argument about the rate or cap will save the position.
Key Takeaway: Employers over-deduct by ignoring EOTs, exceeding the cap, or deducting for their own default. Contractors lose ground by staying silent instead of disputing, and by focusing on the rate instead of the EOT claim that actually controls it.
Frequently Asked Questions
Are "liquidated damages" and FIDIC's "delay damages" the same thing?
Yes. "Liquidated damages" is the term the construction industry uses in everyday speech. FIDIC's defined term is "Delay Damages" — Sub-Clause 8.7 in the 1999 Red and Yellow Books, renumbered Sub-Clause 8.8 in the 2017 Second Edition. Both describe the same mechanism: a pre-agreed sum, stated in the Contract Data or Appendix to Tender, applied for every day the Works run past the Time for Completion.
Does the Employer need to give a formal notice before deducting delay damages?
It depends on the edition. Under FIDIC 1999, the entitlement under Sub-Clause 8.7 is largely self-executing once the Time for Completion passes — it has not generally been treated as needing the same 28-day notice procedure the Contractor follows under Sub-Clause 20.1. Under the 2017 Second Edition, Sub-Clause 2.5 was removed and the unified claims procedure in Sub-Clause 20.2 now applies to both Parties — the Employer must give notice within 28 days of becoming aware of the entitlement, and the claim goes through the same Engineer determination process as a Contractor's claim.
Is there always a cap on how much can be deducted?
Only if one is stated. Sub-Clause 8.7 (1999) and Sub-Clause 8.8 (2017) both cap the total at the "maximum amount of delay damages (if any)" written into the Appendix to Tender or Contract Data. FIDIC does not prescribe a percentage — around 10% of the Contract Price is common in practice, but that is market convention, not a default in the standard form. If the cap field was left blank or deleted, there may be no ceiling at all, worth checking before signing.
Can a delay damages clause be thrown out as an unenforceable penalty?
In principle, yes, though it is a high bar. The modern English test, set out in Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67, asks whether the clause is out of all proportion to any legitimate interest the Employer has in enforcing timely completion — it replaced the older "genuine pre-estimate of loss" test. If a clause is struck down, the Employer does not get the fallback of the stated rate — it has to prove its actual loss through general damages instead.
Does getting an Extension of Time stop delay damages?
Yes, for the period the Extension of Time covers. Delay damages only run from the current Time for Completion, and an Extension of Time moves that date. Grant an EOT for the whole period in dispute and the damages tied to it should be reversed or credited back. Grant a shorter EOT than claimed, and damages still apply for the shortfall — which is why a delay damages dispute and an EOT claim are usually the same fight.
Authoritative Sources
This guide reflects the FIDIC Conditions of Contract and established construction-law authority:
- FIDIC Conditions of Contract — the official contract suite published by the International Federation of Consulting Engineers, which sets out the Sub-Clause 8.7 / 8.8 Delay Damages provision and the Sub-Clause 20.1/20.2 claims procedure.
- Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67 — the UK Supreme Court decision setting the modern test for when a liquidated damages clause crosses the line into an unenforceable penalty.
About the Author
Muhammad M. Jiwani is a Project Director with 15 years' experience on major infrastructure and energy projects administered under FIDIC contracts. He writes from first-hand experience serving notices and managing contractual claims on live projects.