liquidated damages

Liquidated damages are pre-agreed penalties that a contractor must pay for each day a delivery is late. They function as a fixed daily price tag on delay — giving the contracting authority a guaranteed remedy and the supplier a predictable ceiling for risk exposure.

How do liquidated damages work?

Liquidated damages are triggered when a contractor misses a contractual deadline expressly subject to penalties. Unlike ordinary damages claims, the contracting authority does not need to prove actual financial loss — the breach alone is sufficient. The penalty accrues automatically for each day the delay continues, and typically stops upon formal acceptance of the delivery.

The EU procurement directives (2014/24/EU and 2014/25/EU) do not regulate LD clauses directly — they are governed by national contract law in each Member State. In practice, standard contracts across Europe set rates between 0.1 % and 0.15 % of the contract value per day, with total liability capped at 10 % of the contract value or 100 days.

Key principles

• Must be contractually agreed: The applicable rate must be explicitly stated in the contract. Only deadlines expressly marked as penalty-bearing will trigger a claim
• Extensions of time suspend the clock: If the delay is caused by circumstances within the authority's risk sphere, or by force majeure, the contractor may claim an extension — and the penalty is paused
• Proportionality matters: Courts in many EU jurisdictions will not enforce a clause that amounts to a disproportionate penalty rather than a genuine pre-estimate of loss
• Broader consequences: Repeated delays and contract terminations may affect a supplier's ability to qualify for future tenders, as the ESPD requires disclosure of prior performance failures

Tools like Cobrief can help suppliers stay on top of contract deadlines and penalty-bearing milestones, reducing the risk of costly delays.

Liquidated damages balance the need for timely delivery with predictable liability. For contracting authorities, they are a key tool in contract monitoring, while suppliers benefit from clear and capped risk exposure.