As the global economic recession continues many businesses are experiencing significant financial hardship and are seeking to recover any additional funds possible. Richard Bailey examines the prospect of enforcing interest on late payment of commercial debt.
As businesses begin to feel the strain of the current economic climate, methods of recouping sums following late payment of invoices should be considered.
Under commercial debt legislation, debts incurred by suppliers under contracts for the supply of goods and services can claim interest at a rate of 8% above the base rate, along with an additional £100 compensation for each unpaid invoice.
However, this is dependant upon the following:
- The contract must have been agreed after 7th August 2002;
- Both the purchaser and supplier of the goods/services must be acting in the course of business; and
- There must not be any other 'substantial' agreement between the purchaser and the supplier for terms for late payment.
If these are applicable to your contract, even if the invoice is only a day late, you could claim both the interest and the compensation fee. This applies to any debt even though it has since been paid, as the supplier has 6 years within which to bring its claim in England, Wales and Northern Ireland.
However, any agreement between the parties with regards to late payment may supercede the legislation, provided it is substantial and therefore sufficient to compensate the supplier, and is both fair and reasonable. Therefore, before considering taking any action it is important to review your agreement with the purchaser to ensure that no other provisions apply which you should take account of.
Pursuing a claim for interest may not always be cost efficient and may be detrimental to the ongoing business relationship.
If you require any advice on any of the issues raised in this article please contact Richard Bailey or another member of our company commercial team at commercial@steeleslaw.co.uk or on 01603 598000.