If you’re a general contractor or subcontractor, you face a significant risk in your business. It’s referred to as consequential damages that result from a breach of contract. Whether you’re unfamiliar with this term or would like to learn more, keep reading for a detailed breakdown.
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What Are Consequential Damages In Construction?
Consequential damages in construction generally result from performance or completion delays on a construction project that lead to a breach of contract. To illustrate, if your company wins a bid to construct an office building that will be rented out to commercial tenants and it’s not completed on time, the property owner stands to lose a substantial amount of revenue. In turn, they can file a lawsuit against you in an attempt to recoup their losses.
Actual Consequential Damages
Also known as compensatory damages, actual, consequential damages are awarded to the plaintiff if they sustain damages or injuries.
Liquidated Damages
Liquidated damages refer to the sum of cash that a party must pay if they breach a contract. It’s specified in the contract, and both parties must agree to the amount when the contract is signed.
What Do Consequential Damages Mean For Contractors?
Lost Opportunities
You could miss out on other lucrative construction projects if you’re dealing with a lawsuit that interferes with your day-to-day operations.
Lost Profits
If a lawsuit puts your construction company in a financial bind, you could be forced to cancel other projects if you cannot pay suppliers and get the materials you need on time. But you can avoid supplier delays by using a commercial financing company, like Billd. More on that shortly.
Damages To Your Business Reputation
Current and potential customers may walk away before their projects start due to delays, cancellations or the fear that your company cannot uphold their end of the contract.
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3 Tips to Avoid Consequential Damages
1. Consider Having Coverage
Research business liability insurance to determine if it’s an option to protect your construction company in the event of a lawsuit.
2. Add Disclaimers to Your Contracts
Consult with a reputable attorney that can review your contracts and add the necessary disclaimers.
3. Find Solutions that Have Negotiated Terms with Suppliers to Avoid Delays
As mentioned earlier, issuers with suppliers can lead to project delays. You could also risk breaching the construction contract if you’re unable to meet specific deadlines. But you can mitigate financial risks to your construction business by using a commercial financing payment solution, like Billd, to secure the supplies you need.
Billd is available to general contractors and subcontractors nationwide who earn annual revenues between $500,000 and $50 million. However, general contractors and subcontractors who work solely on single-family residential construction projects are not eligible to use Billd.
You’ll get transparent pricing and the ability to work with any material supplier in the United States. Also, you’ll have the leverage to negotiate cash discounts with the supplier you choose to work with since Billd will be covering the cost of materials upfront on your behalf.
Here’s how it works:
- Step 1: Enroll with Billd in just five minutes. Visit the website to create an account, input information about yourself and your company, agree to the terms of the Master ContractorAgreement, and you’re all set. In most instances, you’ll get a decision within 24 hours.
- Step 2: When you’re ready to use Billd, use the online dashboard to create a new project and upload a copy of your contract with the property owner or general contractor on the project. You’ll also need to upload a copy of your supplier quote and the requested payment date.
- Step 3: Billd approves your request and pays the supplier, often on the same day through ACH (unless the supplier requests a check by mail). You’ll also be notified when payment is made and have up to 120 days to repay Billd. But if you get paid by the contractor or property owner sooner, you’re expected to remit payment to Billd at that time.
Get the commercial materials you need now and pay later by filling out this form to request information on how to sign up for Billd today.
