What are losses paid by the contractor if the project is not completed on time called?

The term for losses that a contractor is liable for if a project is not completed on time is known as liquidated damages. Liquidated damages are pre-determined amounts specified in a contract that a contractor agrees to pay the project owner if certain conditions, particularly timely completion of the project, are not met. These damages are intended to provide a remedy for the owner, compensating them for the inconvenience or financial loss caused by the delay.

Liquidated damages are different from retainage, which refers to a portion of the payment withheld by the owner until the project is satisfactorily completed, not necessarily related to delays. Modifications are changes made to the contract terms or conditions, while allowances typically refer to budgetary amounts set aside for specific costs or expenses. Understanding the role of liquidated damages is essential for contractors, as it emphasizes the importance of timely project completion and the financial implications of delays.