Failure to take account of early possession did not render clause a penalty

In Eco World – Ballymore Embassy Gardens Ltd v Dobler UK Ltd [2021] EWHC 2207 (TCC) O’Farrell J held that an agreed damages clause in a construction contract was valid and enforceable notwithstanding the fact that the contract contained no mechanism to reduce the level of liquidated damages payable to reflect the fact that the claimant employer had taken early possession of part of the site. The sum payable was not extravagant, exorbitant or unconscionable in amount nor was it disproportionate when considered in the light of the legitimate interest of the claimant in the enforcement of the primary obligation of the contractor to complete the works in accordance with the terms of the contract. However, even if the clause had been invalid as a penalty clause, it would nevertheless have operated to place a cap on the liability of the defendant in damages in respect of the delay because the clause was drafted both as a limitation clause and an agreed damages clause. The fact that the latter function of the clause was ineffective did not have the necessary effect of rendering the former ineffective.