Are liquidated damages enforceable in Singapore?
Yes, if they are a genuine pre-estimate of the loss likely to flow from the breach, assessed at the time the contract was made. A clause is a penalty, and unenforceable, if the sum is extravagant and unconscionable compared with the greatest loss that could conceivably follow. The Court of Appeal confirmed this Dunlop-based test in Denka Advantech v Seraya Energy [2020] SGCA 119 and declined to adopt the UK legitimate-interest test from Cavendish v Makdessi.
From the RRD Field Guide, checked against the sources cited in Liquidated Damages and Extension of Time in Singapore: An Owner's and Contractor's Guide. General information, not advice for your project.
The fuller picture
In Singapore, a liquidated damages clause is enforceable if it is a genuine pre-estimate of loss and not a penalty; the Court of Appeal in Denka Advantech (2020) kept the traditional Dunlop test and declined the UK Cavendish approach. LDs only run for delay the contractor is responsible for, so the contract needs a clear extension-of-time clause, notice rules and a certification step.
More questions on this topic
- Does the owner have to prove actual loss to claim LDs?
- What happens if the owner causes delay and there is no extension of time clause?
- If the contractor misses the EOT notice deadline, is time at large?
- How is concurrent delay treated in Singapore?
- Should a small fit-out contract have liquidated damages?
- Can LDs be deducted from a progress payment under SOPA?
- Are LDs capped?