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Practice Points: Careful Drafting of LAD Clauses

posted Sep 6, 2021, 7:52 AM by jeffery jim

At the end of the day, while it goes without saying that the current judicial movement upholds the sanctity of contract, this consequently prompts careful consideration when drafting LAD clauses specifically in major construction contracts in view of Cubic. Hence, gleaning from a practical standpoint, there are several key takeaways when drafting LAD clauses:

. Ensuring the stipulated sum in the LAD clause is proportionate with the contract sum and is not exorbitant;
. Ensuring the wordings of the LAD clause is not unconscionable;
. Although the obligation of proving actual loss has been dispensed with, it is still prudent practice to justify the reasonableness of the LAD clause by proving evidence of “actual loss”;
. It is prudent construction practice to keep documentation and records of extra-costs incurred to justify damage suffered by virtue of the contractor’s breach/delay;
. Ensuring record of the basis of quantification to substantiate the reasonableness of the LAD stipulation;
. Contractors should also be prudent to estimate the appropriate completion date/milestone to complete works in the construction contract as it has direct implication with the Employer’s entitlement to LAD; and
. Contractors should ensure that the grounds for extension of time provisions in the construction contract are unambiguous and clear as it has direct implication with the Employer’s entitlement to LAD.