Remedies for Late Payment

You can use your contract to describe what you want to happen if something happens which is outside the original contract:

You can and should also include remedies if (or when) you get paid late. Remedies can provide compensation or procedures to trouble-shoot issues and resolve disputes quickly.

Interest

In my architect’s contract (B2C) she included this remedy for late payment:

If payment of any sums properly due is not made within 7 days we reserve the right to charge interest under the Late Payment of Commercial Debts (Interest) Act 1988 (simple interest at 8% over the Bank of England base rate)…

This clause works B2B but not B2C as interest can only be charged under this Act on debts between companies. My email marketing specialist, has a different approach. His terms say:

A 5% monthly service charge is payable on all invoices over 30 days…

But this equates to somewhere between 60-80% over a year which is considerably more than 8% above base (as the Act allows). If you want more effective remedies, see chapter 17 of my book How to Write Simple and Effective Consultant Appointments in Just 500 Words.

Suspension

If your contract is a construction contract (B2B) then under the Construction Acts you have rights for late payment including a right to adjudicate unpaid sums and a right to suspend any of the works or services for late or non-payment. You have to give notice of your intention to suspend, but if you do then you are given extra time to complete and the costs of suspending.

What should you do?

You can minimise the risk of late payments by working with the right sort of clients.

In your contract, you can include with short payment timescales [read more] and advance payments, as well as keeping payment procedures simple [not like these shockers]. Then it’s a case of chasing the late payers, relying on the remedies in your contract (express and implied).

After you eventually get paid, then carefully if it is worth doing business with them in the future!

 

 

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