Liquidated damages are the pre-agreed sum the contractor pays for late completion, usually expressed per week or per day of delay beyond the completion date.
They give both parties certainty: the employer does not have to prove its actual loss, and the contractor knows its exposure. Deduction normally requires the contractual machinery to be operated correctly, and in UK practice a valid extension of time defeats LDs for the extended period.
That is why EOT and LD arguments are two sides of the same coin, and why the records that support an EOT are, in effect, the contractor’s insurance policy against delay damages.