---
title: 3 Types of Construction Contract Damages
description: Uncertainty with provisions in a construction contract may lead to costly disputes. These are the 3 types of construction contract damages to know about.
image: https://blog.tsibinc.com/hubfs/construction%20contract%20damages.jpg
---
- [Resources](https://tsibinc.com/resources/)
- [Contact Us](https://tsibinc.com/contact-us/)
[Pay Online](https://tsibinc.com/pay-online/)
[Wrapworks Contractor Portal](https://wrapup.vuewrapup.com/contractorportal)
[](https://tsibinc.com)
- Insurance
- Commercial Insurance
- Commercial Insurance 1
- [Automobile Liability](https://tsibinc.com/insurance/commercial-insurance/automobile-liability/)
- [Builder’s Risk](https://tsibinc.com/insurance/commercial-insurance/builders-risk/)
- [Property Insurance](https://tsibinc.com/insurance/commercial-insurance/property-insurance/)
- [Pollution](https://tsibinc.com/insurance/commercial-insurance/pollution-legal-liability-insurance/)
- [Cyber](https://tsibinc.com/insurance/commercial-insurance/cyber/)
- [Employment Practice Liability & Officer’s Liability](https://tsibinc.com/insurance/commercial-insurance/directors-officers-employment-practices-liability/)
- Commercial Insurance 2
- [Excess Liability](https://tsibinc.com/insurance/commercial-insurance/excess-liability-insurance/)
- [General Liability](https://tsibinc.com/insurance/commercial-insurance/general-liability-insurance/)
- [Employee Benefits](https://tsibinc.com/insurance/employee-benefits-programs/)
- [Owner’s Protective Professional Indemnity](https://tsibinc.com/insurance/commercial-insurance/owners-protective-professional-indemnity/)
- [Professional Liability](https://tsibinc.com/insurance/commercial-insurance/professional-liability/)
- Commercial Insurance 3
- [Railroad Protective Liability](https://tsibinc.com/insurance/commercial-insurance/railroad-protective-liability/)
- [Terrorism](https://tsibinc.com/insurance/commercial-insurance/terrorism/)
- [Umbrella](https://tsibinc.com/insurance/commercial-insurance/umbrella/)
- [Workers’ Compensation Insurance](https://tsibinc.com/insurance/commercial-insurance/workers-compensation-insurance/)
- Risk Solutions
- [Captives](https://tsibinc.com/insurance/risk-solutions/captives/)
- [Claims Services](https://tsibinc.com/insurance/risk-solutions/claims-services/)
- [Insurance Consulting](https://tsibinc.com/insurance/risk-solutions/insurance-consulting/)
- [Risk Management](https://tsibinc.com/insurance/risk-solutions/risk-management/)
- [Safety & Loss Control](https://tsibinc.com/insurance/risk-solutions/safety-loss-control/)
- [Small Contract Bond Program](https://tsibinc.com/insurance/risk-solutions/small-contract-bond-program/)
- [Surety Bonding](https://tsibinc.com/insurance/risk-solutions/surety/)
- Wrap-Ups
- [Co-Broker Partnerships](https://tsibinc.com/wrap-ups/co-broker/)
- [OCIP/CCIP](https://tsibinc.com/wrap-ups/ocip-ccip/)
- [Risk Management Information System](https://tsibinc.com/wrap-ups/risk-management-information-system/)
- [Wrap Administration](https://tsibinc.com/wrap-ups/wrap-administration/)
- [Wrap Claims Services](https://tsibinc.com/wrap-ups/claims-services/)
- [Wrap Risk Management](https://tsibinc.com/wrap-ups/risk-management/)
- [Wrap Safety & Loss Control](https://tsibinc.com/wrap-ups/safety-loss-control/)
- Industries
- [Aviation](https://tsibinc.com/why-tsib/industries/aviation/)
- [Civil Construction & Infrastructure](https://tsibinc.com/why-tsib/industries/civil-construction-infrastructure/)
- [Construction](https://tsibinc.com/why-tsib/industries/construction/)
- [Data Centers](https://tsibinc.com/why-tsib/industries/data-center/)
- [Education](https://tsibinc.com/why-tsib/industries/education/)
- [Industrial & Manufacturing](https://tsibinc.com/why-tsib/industries/industrial-manufacturing/)
- [Life Sciences](https://tsibinc.com/why-tsib/industries/life-sciences/)
- [Public Entity](https://tsibinc.com/why-tsib/industries/public-entity/)
- [Real Estate Developers](https://tsibinc.com/why-tsib/industries/real-estate-developers/)
- [Sports & Entertainment](https://tsibinc.com/why-tsib/industries/sports-entertainment/)
- MWBE Compliance
- Compliance Services
- [Program Consultancy and Owner’s Representative](https://tsibinc.com/mwbe-compliance/services/program-consultancy-and-owners-representative/)
- [Project Compliance and Monitoring](https://tsibinc.com/mwbe-compliance/services/project-compliance-and-monitoring/)
- [Specialty Programs](https://tsibinc.com/mwbe-compliance/services/specialty-programs/)
- [Small Business Capacity Building](https://tsibinc.com/mwbe-compliance/services/small-business-capacity-building/)
- [Software Solutions](https://tsibinc.com/mwbe-compliance/services/software-solutions/)
- Stakeholders/Clients
- [Owners/Agencies](https://tsibinc.com/mwbe-compliance/stakeholders-clients/owners-agencies/)
- [General Contractors and Construction Managers](https://tsibinc.com/mwbe-compliance/stakeholders-clients/general-contractors-and-construction-managers/)
- [Trade Partners](https://tsibinc.com/mwbe-compliance/stakeholders-clients/trade-partners/)
- [Diverse Businesses](https://tsibinc.com/mwbe-compliance/stakeholders-clients/diverse-businesses/)
- [Workforce](https://tsibinc.com/mwbe-compliance/stakeholders-clients/workforce/)
- Training
- [Federal/State/Local Private Requirements](https://tsibinc.com/mwbe-compliance/training/federal-state-local-private-requirements/)
- [Fraud Monitoring and Mitigation](https://tsibinc.com/mwbe-compliance/training/fraud-monitoring-and-mitigation/)
- [Insurance/Bonding/Capital](https://tsibinc.com/mwbe-compliance/training/insurance-bonding-capital/)
- Opportunities
- [Business Enterprise Questionnaire](https://tsibinc.com/mwbe-compliance/opportunities/business-enterprise-questionnaire/)
- [Out of Work List](https://tsibinc.com/mwbe-compliance/opportunities/out-of-work-list/)
- [MWBE Support & Services](https://tsibinc.com/mwbe-compliance/opportunities/mwbe-support-services/)
- Why TSIB
- [Our Difference](https://tsibinc.com/why-tsib/our-difference/)
- [Meet the Team](https://tsibinc.com/why-tsib/meet-our-team/)
- [Careers](https://tsibinc.com/why-tsib/careers/)
- [Blog](https://blog.tsibinc.com/)
This is a search field with an auto-suggest feature attached.
- There are no suggestions because the search field is empty.
{id=6361387036, name=Contracts, slug=contracts}
# Knowledge Corner
July 21, 2020
## 3 Types of Construction Contract Damages
- [Tweet](https://twitter.com/share)
In today’s construction climate, building projects and construction contracts can be extremely complex. A Contractor must become thoroughly familiar and fully understand the contract’s terms and conditions.
Any uncertainty with the provisions in a contract may lead to costly disputes whether the resolution is by way of mediation, arbitration, or litigation. All of these dispute resolution forums can be expensive and time-consuming. The ultimate purpose of dispute resolution is to determine the amount of money the party claiming to be damaged by a contract breach can reasonably expect to recover.
There are generally three classifications of damages in a construction contract:
1. Direct
2. Liquidated
3. Consequential
**Direct Damages**
Direct or actual damages are easy to calculate since they are the actual cost to repair or replace any defective or deficient work. Included could be any additional cost to complete the project over the original contract price in the event the Contractor failed to complete the work properly or in a timely manner.
**Consequential Damages**
However, [**consequential damages**](https://blog.tsibinc.com/liquidated-damages-versus-consequential-damages) are much more problematic to calculate or predict, as they affect completion delays and the project being built properly. It is a difficult task to determine what it may cost a Project Owner in the event a project is not completed properly or in a timely manner. There are so many uncertainties such as lost profits, damage to business reputation, and goodwill. How does one place a dollar amount on these uncertainties?
The legal theory of consequential damages derives from the 1854 English contract law case of [**Hadley v. Baxendale**](https://www.casebriefs.com/blog/law/contracts/contracts-keyed-to-farnsworth/remedies-for-breach/hadley-v-baxendale/)*.* The Court held that to determine consequential damages from a [**breach of contract**](https://en.wikipedia.org/wiki/Breach_of_contract): a breaching party is liable for all losses that the contracting parties should have ***foreseen—***but is not liable for any losses that the breaching party could ***not have foreseen—***on the information available to him at the time the contract was entered into. Although the Court held foreseeability as the cornerstone of liability, one must still determine the dollar amount to place on the loss caused by the breach.
It is possible that **[a Contractor](https://blog.tsibinc.com/why-do-contractors-have-to-provide-additional-insured-endorsements)**may be held liable and pay for damages more than the contract price. This amount may be less than profits the Project Owner might have realized if **[the contract](https://blog.tsibinc.com/what-does-that-indemnification-clause-mean-in-your-contract)** had been properly performed and in a timely fashion. New businesses can be problematic since they do not have a history of annual profits; such amounts cannot be reasonably estimated.
Therefore, in order to avoid either situation, parties may agree to contractually waive consequential damages and agree to a somewhat more predictable form of damages in the event of a contract breach.
**Liquidated Damages**
Liquidated damages can be challenging to calculate, as they are for [**intangible or hard to define losses.**](https://www.investopedia.com/terms/l/liquidateddamages.asp) Liquidated damages in a contract may be paid in the form of a lump sum or based on a period of delay. Two examples showing this are:
1. The lump sum could be $25,000 in the event of a breach.
2. $500 per day for each day the project remains incomplete after the agreed-upon date of substantial completion date.
No matter the construction project, it’s important that as an Owner or Contractor you must understand your contracts. Disputes often occur, even when we don’t think they will—which is why it’s better to protect yourself upfront. It’s always best to work with a Broker experienced in the [**Construction industry**](http://www.apple.com), so they can review the contract before you sign it.
If you want to learn more about what to look for in your contract or want an expert to review a current construction contract, [**reach out to TSIB today**](https://tsibinc.com/contact-us/)!
[](https://cta-redirect.hubspot.com/cta/redirect/3391365/c6df08ef-504d-437c-b248-6f938c31f3d7)
image credit: Panumas Yanuthai/shutterstock.com
Topics: [Claims](https://blog.tsibinc.com/topic/claims), [Contracts](https://blog.tsibinc.com/topic/contracts)
Written by [The TSIB Team](https://blog.tsibinc.com/author/the-tsib-team)
All Authors and TSIB
### Comments
Comment Cancel
[Back to Blog](https://blog.tsibinc.com/)
## Sign-up for TSIB’s weekly Blog
[Sign Up](https://tsibinc.com/blog-sign-up)
[](https://tsibinc.com)
**Join our dynamic team!**
At TSIB, we are Committed to our Clients and to our workforce.
[Learn more](https://tsibinc.com/careers/)
###### Client support
**Insurance:**
[(201) 267-7500](tel:2012677500)
**Wrap-Ups:**
[(203) 945-1780](tel:2039451780)
**Surety:**
[(201) 267-7500](tel:2012677500)
**Employee Benefits:**
[(213) 369-4496](tel:2133694496)
[View All Contacts](https://tsibinc.com/contact-us/)
###### Recent Blog
- [Construction Insurance: Why a Coordinated Risk Strategy Matters](https://blog.tsibinc.com/construction-insurance-why-a-coordinated-risk-strategy-matters)
- [3 Pillars that Build a Safety Culture](https://blog.tsibinc.com/3-pillars-that-build-a-safety-culture)
- [The Human Side of Construction Safety](https://blog.tsibinc.com/the-human-side-of-construction-safety)
- [How to Manage Heat Safety on Construction Jobsites](https://blog.tsibinc.com/how-to-manage-heat-safety-on-construction-jobsites)
Blog Sign-Up
[Sign up today](https://tsibinc.com/blog-sign-up)
###### Connect with us
-
-
-
-
-
[](https://www.insurancejournal.com/top-100-insurance-agencies/)
The material on the website is for informational purposes only. It should not be construed as legal advice and is recommended you contact your attorney for legal advice.
Copyright © 2026 by Turner Surety & Insurance Brokerage, Inc.
- [Locations](https://tsibinc.com/contact-us/)
- [Terms of Use](https://tsibinc.com/terms-of-use/)
- [Privacy Policy](https://tsibinc.com/privacy-policy/)
```json
{
"@context" : "https://schema.org",
"@type" : "BlogPosting",
"author" : {
"@type" : "Person",
"name" : "The TSIB Team",
"url" : "https://blog.tsibinc.com/author/the-tsib-team"
},
"dateModified" : "2024-06-04T18:35:49.866Z",
"datePublished" : "2020-07-21T18:00:00.000Z",
"headline" : "3 Types of Construction Contract Damages",
"image" : [ "https://blog.tsibinc.com/hubfs/construction%20contract%20damages.jpg" ],
"mainEntityOfPage" : {
"@id" : "https://blog.tsibinc.com/3-types-of-construction-contract-damages",
"@type" : "WebPage"
},
"publisher" : {
"@type" : "Organization",
"logo" : {
"@type" : "ImageObject",
"url" : "https://blog.tsibinc.com/hubfs/turner-surety-and-insurance-brokerage-r-logo2x.png"
},
"name" : "TSIB"
}
}
```