Liquidated Damages exceeding maximum amount

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Liquidated Damages exceeding maximum amount

Post by peegee15 on Thu Sep 04, 2014 6:09 pm

Details:
Nature- Goods (Supply, installation, and commisioning of electronic water AC system)
Contract price- P29,100,000.00
No. of days delayed- P146 days
Liquidated damages- P4,248,600.00
Max. amount- P2,910,000.00

The PE instead of rescinding the contract (Sec. 68 of RIRR) accepted the work as done but on payment, deducted from the contract price the amount equivalent to P2,910,000.00 or 10% of the contract price (max. amount for LD). Is this acceptable?
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Re: Liquidated Damages exceeding maximum amount

Post by regina avelino on Wed Sep 10, 2014 11:05 am

3. Liquidated Damages
3.1. When the supplier fails to satisfactorily deliver goods under the contract within the specified delivery schedule, inclusive of duly granted time extensions, if any, the supplier shall be liable for damages for the delay and shall pay the procuring entity liquidated damages, not by way of penalty, an amount equal to one-tenth (1/10) of one percent (1%) of the cost of the delayed goods scheduled for delivery for every day of delay until such goods are finally delivered and accepted by the procuring entity concerned.

Section 68. Liquidated Damages
All contracts executed in accordance with the Act and this IRR shall contain a provision on liquidated damages which shall be payable by the contractor in case of breach thereof. For the procurement of goods, infrastructure projects and consulting services, the amount of the liquidated damages shall be at least equal to one-tenth of one percent (0.001%)59 of the cost of the unperformed portion for every day of delay. Once the cumulative amount of liquidated damages reaches ten percent (10%) of the amount of the contract, the procuring entity shall rescind the contract, without prejudice to other courses of action and remedies open to it.

Please check first if there were approved extension granted.

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Re: Liquidated Damages exceeding maximum amount

Post by peegee15 on Wed Sep 10, 2014 4:16 pm

No extension was requested ma'am therefore, no extension was approved.
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Re: Liquidated Damages exceeding maximum amount

Post by regina avelino on Thu Sep 18, 2014 5:32 pm

the law specified that the "the procuring entity shall rescind the contract"

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Re: Liquidated Damages exceeding maximum amount

Post by engrjhez® on Fri Sep 19, 2014 11:11 pm

peegee15 wrote:Details:
        Nature- Goods (Supply, installation, and commisioning of electronic water AC system)
        Contract price- P29,100,000.00
        No. of days delayed- P146 days
        Liquidated damages- P4,248,600.00
            Max. amount- P2,910,000.00

The PE instead of rescinding the contract (Sec. 68 of RIRR) accepted the work as done but on payment, deducted from the contract price the amount equivalent to P2,910,000.00 or 10% of the contract price (max. amount for LD). Is this acceptable?

No. There is nothing in the rules that provide for such practice. The procuring entity is exercising discretion beyond the import of the contract. As Ms. Regina correctly pointed out, the procuring entity has only one course of action: to rescind the contract. Such liquidated damages may only be settled/claimed judicially and not extra-judicially, unless otherwise allowed by law.
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