Assessment and enforcement of liquidated damages in construction contracts in Ghana

Abstract

Purpose The enforcement of liquidated and ascertained damages (LADs) can be problematic when the amounts are poorly assessed and there are lapses in the administration of contracts. This paper seeks to investigate the relevance of LAD clauses in construction contracts in Ghana, as well as the methods employed in their assessment and enforcement. Design/methodology/approach A parallel survey method was adopted. Three sets of similar questionnaires (slightly modified) were administered to professionals in client, consultant and contractor organisations in contract administration roles, to explore their experiences in the assessment and enforcement of LADs. Findings LADs are not serving their purpose in construction contracts in Ghana. Clients have created situations that render LADs unenforceable. LAD amounts are also not genuine pre‐estimates of expected loss to be incurred, as assumptions and guesses rather than genuine calculations on a case‐by‐case basis are adopted in their assessment. Originality/value This research indicates that the enforcement of LADs can be enhanced if clients become more diligent in their contractual, mostly financial, obligations. Since a purposive sampling procedure was adopted, the findings and conclusions of this research are only tentative, but nevertheless raise serious issues regarding contract administration practices in Ghana.

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