Which two items are typically included in EPC contract terms?

• A. Liquidated damages and performance guarantees
• B. Liquidated damages and limitations of liability
• C. Penalties and incentives
• D. Force majeure and change orders

Answer: (B)

In EPC contracts, risk is allocated through predefined remedies and a cap on exposure. Liquidated damages set a pre-agreed monetary consequence if the project is not completed on time or if milestones aren’t met, giving a clear, predictable incentive to stay on schedule and a straightforward remedy for delay without arguing about actual losses. Pairing that with a limitations of liability clause keeps the contractor’s financial exposure from spiraling due to unforeseen events or bigger market swings, often with carve-outs for things like intentional misconduct or infringement. This combination balances incentives, schedule control, and financial risk in a way that’s commonly seen in EPC terms. Other options mix remedies and risk controls that are less universally standard in EPC contracts, making the liquidated damages plus liability cap pairing the most typical.