Late payment interest rate specified in contract

[TheFaQQer]

You cannot simply sign away statutory rights like this. The government foresaw that large companies would bully small ones into accepting terms like this so they legislated in such a way that they couldn't get away with it. As I keep saying to people, stand up to them and they will back down. Invoice for statutory penalties and interest then hand it to a debt collector if they don't pay.

If you have a clause in the contract which shows your intention and the legal relationship defining what you can charge, and you then try to argue otherwise, then it is significantly harder to do. I'm not saying that it's impossible, but the onus is now on you to prove why that clause in the contract is invalid.

Invoice for 8.5% interest, and hope that they don't spot it - if they do, then be prepared to argue it. When you get a debt collection agency in, explain that you invoiced for something which you aren't entitled to invoice for. Then go to court and argue that you were entitled to charge that amount.

Good luck.

[Safe Collections]

Thanks all for your comments, the rub in this instance is that the clause specifying the interest rate then goes on to state:

The parties agree that this represents a substantial remedy in the context of the Late Payment of
Commercial Debts (Interest) Act 1998.

Does this make claiming the statutory interest rate suitably unlikely to get anywhere or is it worth a punt?

That is sneaky...

How that particular clause would hold up under a courts scrutiny is anyone's guess frankly.

The problem here is you have expressly agreed these terms, so the argument would be about the legality and enforceability of these terms. Ie do they constitute a substantial remedy or not?

These are the types of questions the courts decide and practically, do you want to get into a protracted argument with the pimp over this?

You could well spend considerably more in billable time than you are hoping to recover.

[Wanderer]

These are the types of questions the courts decide and practically, do you want to get into a protracted argument with the pimp over this?

You could well spend considerably more in billable time than you are hoping to recover.

Or you could just invoice for it and then pass it to Credit Management & Debt Recovery Specialists if they refuse to pay....

[Boo]

That is sneaky...

How that particular clause would hold up under a courts scrutiny is anyone's guess frankly.

The problem here is you have expressly agreed these terms, so the argument would be about the legality and enforceability of these terms. Ie do they constitute a substantial remedy or not?

These are the types of questions the courts decide and practically, do you want to get into a protracted argument with the pimp over this?

You could well spend considerably more in billable time than you are hoping to recover.

I agree that it will be for the court to decide but the OP is not completely clear whether s/he has or has not in fact been paid yet ? If the original bill has been paid now then I personally would not pursue the late payment charge and interest as not being worth the effort and bad feeling.

On the other hand, if the original bill is still outstanding then I would add the 8.5% + charges and let the judge reduce that part of the claim if they see fit.

Boo

[BHicks]

I agree that it will be for the court to decide but the OP is not completely clear whether s/he has or has not in fact been paid yet ?
Boo

For the record, the most recent invoice has finally been paid.

In terms of how late they were, we're talking about a few days so even if the interest portion won't amount to much, I fully intend to stick them for the fixed cost element.

I have little sympathy for them. They processed the self bill late when the contract clearly states that the onus is on them to follow up on timesheets believed to be outstanding (which they didn't). When I brought the error to their attention, it took them more than a week to sort it out.

As for "bad feelings" with the agency, please don't make me laugh. This is a business relationship pure and simple. If they pay late, they face the consequences.

As for arguing that the clause is inapplicable at this point, in a situation where the contractual rate of interest is a fraction of the statutory interest rate, I would argue that it's a grossly unfair contract term and the following guidance would appear to support this: Late payment directive

[malvolio]

For the record, the most recent invoice has finally been paid

In terms of how late they were, we're talking about a few days so even if the interest portion won't amount to much, I fully intend to stick them for the fixed cost element..

Sigh...

As for arguing that the clause is inapplicable at this point, in a situation where the contractual rate of interest is a fraction of the statutory interest rate, I would argue that it's a grossly unfair contract term and the following guidance would appear to support this: Late payment directive

So why did you sign to say you accepted it?

[TheFaQQer]

As for arguing that the clause is inapplicable at this point, in a situation where the contractual rate of interest is a fraction of the statutory interest rate, I would argue that it's a grossly unfair contract term and the following guidance would appear to support this: Late payment directive

What negotiation did you do to have it removed? The onus is going to be on you to prove that this is unfair, which in a business to business relationship like this is not easy. If you tried to negotiate it and failed, then you will be in a significantly better position to argue it in court than if you just signed it blindly without any consideration of the reality.

One of the key cases in determining whether whether a clause is unfair is Smith v Eric S Bush - there are four points to consider:

1. Equality of bargaining power
2. How practical was it to obtain independent legal advice regarding the term?
3. How difficult is the task being undertaken for which liability is being excluded? (not relevant here)
4. What are the practical consequences of ruling that a term is unreasonable?

So, in a case where you are dealing with an agency, I'd suggest that there is no significant difference in equality of bargaining power, and that you have the opportunity to obtain legal advice.

[TheFaQQer]

As for arguing that the clause is inapplicable at this point, in a situation where the contractual rate of interest is a fraction of the statutory interest rate, I would argue that it's a grossly unfair contract term and the following guidance would appear to support this: Late payment directive

That document says that an example substantial remedy would include

An interest rate on late payment, significantly lower than the statutory rate, that fails to recompense the supplier from being kept from their money, because it is below the supplier’s theoretical [or actual] cost of agreed borrowing

You have also agreed that this is a substantial remedy, as per the clause you mentioned earlier. So you'd be hard pushed to argue that it wasn't a substantial remedy.

[BHicks]

Sigh...


So why did you sign to say you accepted it?

To address your first "point", you think I should just let it go? Were I to do so, what would this accomplish exactly? Build "goodwill" with the agency? They were given ample opportunity to get the issue remedied (the root cause for which was their fault) so payment could be made on time and they failed to do so.

The fixed cost charge is supposed to act as a deterrent, but that only works if you're prepared to use it as intended. Somebody will have to justify/sign off on paying that and they'll want to know why the payment was late in the first place. Who knows, maybe they might improve their approach to such things.

Why did I sign the contract? Well, I did have it professionally reviewed by B&C and no concerns were raised over that section. Never having had an invoice paid late before, I was not familiar with the statutory interest rates applicable in such situations but am now.

[TheFaQQer]

Why did I sign the contract? Well, I did have it professionally reviewed by B&C and no concerns were raised over that section. Never having had an invoice paid late before, I was not familiar with the statutory interest rates applicable in such situations but am now.

So, you took professional advice, and now think you stand a chance of arguing that this was an unfair contract term?

I'd go back to B&C and ask why they didn't flag it up to you as an unfair term, and see what they say.