CLYDE & CO UPDATER - LIQUIDATED DAMAGES IN THE TANZANIAN CONSTRUCTION INDUSTRY

As the construction industry continues to develop in Tanzania, the use of international standard contracts has increased. In particular, we have seen the FIDIC (Fédération Internationale Des Ingénieurs-Conseils) standard form contracts used more frequently in this jurisdiction.

It is standard practice for most construction contracts, including FIDIC contracts, to contain a liquidated damages clause. As liquidated damages (LDs) provide for a pre-agreed rate of damages, payable to the employer by the contractor in the event of a contractor's delay in performing the work, the risk of delay for the employer is mitigated.

LDs, as opposed to general damages, do not require the claimant to prove that the losses claimed have actually been suffered. As such, the contract will provide for a genuine and fixed pre-agreed estimate of loss. Often this is calculated based on the amount of loss that will be incurred on a daily basis if the work is not completed on time.

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