What is liquidated damages?

Liquidated damages is an amount equal to at least one tenth (1/10) of one (1) percent of the cost of the unperformed portion of the works for every day of delay.

Section 68 of the revised Implementing Rules and Regulations (IRR) of Republic Act (RA) 9184 provides that the amount of the liquidated damages shall be at least equal to one-tenth of one percent (0.1%) of the cost of the unperformed portion for every day of delay for the procurement of goods, infrastructure projects, and consulting services. [GPPB]

A similar provision is found in Section 3.1 of Annex “D” of the same IRR, which states that “the supplier shall be liable for damages for the delay and shall pay the procuring entity liquidated damages, not by way of penalty, in an amount equal to one-tenth (1/10) of one percent (1%) of the cost of delayed goods scheduled for delivery for everyday of delay until such goods are finally delivered and accepted by the procuring entity concerned. [GPPB]

Can agencies impose liquidated damages exceeding 10%?

🔔 Maximum of 10% lang po ang Liquidated Damages. — [ALCA]

🔔 May GPPB Resolution on this, maximum of 10% only ang Liquidated Damages, as shown below: [GIO]

🔔 It is worth noting above that once the amount of liquidated damages reaches 10%, the Procuring Entity may rescind or terminate the Contract.

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Can the Procuring Entity just cancel the Contract once the supplier failed to deliver goods or render services on time?

🔔 The sanctions or penalties that a Local Government Unit can impose to a supplier of goods who failed to deliver all the items indicated in the Purchase Order are the following:

🔔 In case of default of a supplier in the performance of its contractual obligations, the following may be undertaken: (1) imposition of liquidated damages in the amount equal to one-tenth of one percent (0.1%) of the cost of the unperformed portion for every day of delay; (2) termination of contract based on the grounds and following the procedures stated in the Guidelines on Termination of Contracts; and (3) issuance of blacklisting order and forfeiture of performance security in accordance with the provisions of the Uniform Guidelines on Blacklisting. [SIY]

🔔 If the unperformed obligation of the supplier is more than 10%, the PE has the option to terminate the contract. But the later should inform in writing the former that he faulted in delivering the required goods on target date,for which he is under obligation to deliver in full. The other option is for the PE to allow the supplier to comply with his obligation plus liquidated damages. [BALDONADO]

🔔 Pwede [quantum meruit ata tawag], ang babayaran ng Procuring Entity ay yung delivered na lang. at mas lalong pwede kung stipulated sa Special Conditions of Contract (SCC) or General Conditions of Contract (GCC). [SALVATION]

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Ugaliing tignan kung na-deliver o na-render ang goods o services sa pinagkasunduang date of delivery upang malaman kung kailangang maningil ng liquidated damages.

Pursuant to the RA 9184 and its Revised Implementing Rules and Regulations (RIRR) the applicable rate for liquidated damages is one tenth (1/10) of one (1) percent of the amount of the unperformed portion for every day of delay and the maximum deduction shall be ten percent (10%) of the contract amount.

If there’s no demand, there’s no delay; hence, no liquidated damages can be imposed — is this correct?

🔔 Wrong. Civil code is not applicable because the provisions of the RA 9184, specifically on the payment of liquidated damages shall govern. [Saguid]

🔔 Demand is not necessary. The moment the supplier conforms with the contract/PO/JO, the stipulation will be the basis for liquidated damages. [Tolentino]

🔔 [Under] Article 1169 of New Civil Code, [the general rule is] those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. “NO DEMAND NO DELAY” is ONLY A GENERAL RULE.

EXEMPTION: However, the demand by the creditor shall not be necessary in order that delay may exist:

(1) When the obligation or the law expressly so declare; or

(2) When from the nature and the circumstances of the obligation it appears that the designation of the time when the thing is to be delivered or the service is to be rendered was a controlling motive for the establishment of the contract; or

(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.
In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills his obligation, delay by the other begins.

IN THIS CASE APPLY THE # 1 Exemption: There is no need for demand when both parties agreed to an obligation to give that when the debtor fails to deliver the thing on time such debtor would be penalized. (This provision usually included in Purchase Orders or Contracts specifically in the imposition of Liquidated Damages). This stipulation of the parties renders the need for demand in order for penalty to materialize is unimportant. [Bautista]

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If the contract is terminated, do the agency need to charge liquidated damages on the undelivered goods or unrendered services?

📣 Refer to GPPB Resolution No. 02-2020 amendment as follows: “In case the total sum of liquidated damages reaches ten percent (10%) of the total contract price, the Procuring Entity concerned may rescind the contract and impose appropriate sanctions over and above the liquidated damages to be paid. [Ellis]

📣 The rule puts the remedy of rescission as an alternative. How would you then charge [liquidated damages] LD if you opt for the alternative? It is my one cent opinion that when the rule speaks of the LD to be paid, it refers to LD applicable to items delivered where LD is applicable. [Bangnan]

📣 [Liquidated Damages] is for late deliveries. Termination is for non-delivery or non-performance of obligations. If the goods are undelivered, there is no obligation to pay so there is nothing to deduct the LD from. The penalties for termination due to default are forfeiture of performance bond, and blacklisting. [Reyes]

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