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Construction Law/Why Performance Guarantee and Liquidated Damages Are Not Applicable in Consultancy Services Contracts

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Question
Dear Mr, Dowse,

I hope this note finds you healthy and thank you for your usual expert advice.

I was wondering to know about a logical reason behind: Why obtaining performance guarantee is not required in consultancy services contracts and also why liquidated damages are not applicable in consultancy services contracts.

Although, the nature of delay or defaulting is same as construction contracts but the above two important clauses which may help the client to recover any damages are not applied in most of the consultancy services contracts.

Regards,
Mohammad Adil

Answer
Dear Mohammad Adil,

Thank you for this question.

Whilst most standard forms of consultancy contract do not specify a requirement for performance guarantees or liquidated damages there is nothing barring the Parties from agreeing to include such clauses. I stress that it should be agreed and not merely imposed.

The Employer should consider whether he gains from incorporation, or whether he would suffer a detriment. Usually when new constraints are introduced there is an increase in price.

With consultancy work there is perceived to be less risk of failure than with construction contracts; and the scope of works for consultants is often not a precisely defined as with construction contracts. For these and other reasons it is not common to find a need for such guarantees or delay damages clauses.


I hope that this assists you.

Kind regards,
John Dowse

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John Dowse

Expertise

Legal; contract interpretation; quantum; delay analysis. Practitioner in arbitration, adjudication and mediation.

Experience

Thirty-three (33) years experience in building and construction, at all levels both within contracting and consulting organisations. Practising arbitrator, adjudicator, and mediator. Faculty approved trainer for the Chartered Institute of Arbitrators. Lecturer on construction contract forms and dispute resolution practices.

Organizations
Chartered Institution of Civil Engineering Surveyors Chartered Institute of Arbitrators Institute of Directors Society of Construction Arbitrators

Publications
Various UK and International construction and legal publications.

Education/Credentials
LLB (Hons), Pg Dip (Legal Practice), MCInstCES MCIArb MIOD Barrister

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