BELFORT
Financials

Liquidated Damages

Liquidated damages (LDs) are pre-agreed financial penalties defined in the contract, triggered when a milestone is missed. Belfort lets you encode these rules once and automatically computes the exposure on each linked risk.

What are liquidated damages?

Unlike general damages (which require proof of actual loss), liquidated damages are a contractually fixed amount — agreed in advance between parties as a genuine pre-estimate of the loss caused by a specific breach, typically a delay.

In EPC and industrial contracts, LDs are almost always tied to schedule milestones: X% of contract price per day of delay, capped at Y% of contract price. Belfort encodes this logic directly into the LD rule so the exposure is always computed consistently.

LD rule fields

Field Description
Title Short name of the rule (e.g. "Delay LD – Mechanical Completion").
Basis Per day, per week, or lump sum — defines the unit over which the penalty accrues.
Amount type Fixed (absolute currency amount) or Percentage (% of contract price per unit).
Amount value The numeric value — either the fixed amount or the percentage rate.
Cap (%) Maximum total LD exposure expressed as a percentage of contract price. Belfort automatically caps the computed amount.
Linked milestone The schedule event this LD rule protects. Linking a risk to this milestone automatically applies the rule.
Source clause The contract clause from which the rule was extracted, for traceability.

Exposure calculation

When a risk is linked to a milestone that has an LD rule, and an estimated delay is provided, Belfort computes the direct cost of the risk automatically using the following logic:

Step 1 — Compute base units

  • per_day → base units = delay (days)
  • per_week → base units = ⌈delay / 7⌉ (weeks, rounded up)
  • lump_sum → base units = 1

Step 2 — Compute raw exposure

  • Fixed: raw = amount_value × base units
  • Percentage: raw = (amount_value / 100) × contract price × base units

Step 3 — Apply cap

If a cap percentage is defined:
max_exposure = contract price × (cap% / 100)
final = min(raw, max_exposure)

Contract price is required for percentage-based rules

If no contract price is set in the financial parameters, percentage-based LDs cannot be computed. Set it in Financials → Parameters.

Risk → Milestone → LD flow

The recommended workflow keeps LD rules decoupled from individual risks — they are attached to milestones, which risks reference:

1

Create the LD rule in Financials

Go to Financials → Penalty rules and encode the LD clause from your contract. Link it to the relevant milestone.

2

Link the risk to the impacted milestone

When creating or editing a risk, select the impacted milestone. Belfort resolves the attached LD rule automatically.

Exposure is computed and stored

The direct cost field of the risk is updated immediately with the calculated LD exposure and feeds into the dashboard KPIs.

AI-assisted extraction

Belfort can scan your uploaded contract documents and automatically extract LD rules. Each extracted rule is created with a pending status and must be reviewed and confirmed before it becomes active.

Always verify AI-extracted rules

LD clauses often contain nuances — grace periods, exceptions, step-down caps — that require human review. Treat AI extraction as a first draft, not a final configuration.

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