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What reason has the client provided for being late with payments?
Also is there a specific payment date by which they must adhere?
is there a specific payment date by which they must adhere?
Hello, not sure if you saw my initial query above - is there a specific payment date by which they must adhere?
Hello, thanks for getting back to me. It is indeed possible to change interest for late payments and many companies do so. You just need to ensure that there is a clear contractual right allowing you to do so and it has been exercised properly, meaning that you can show the conditions to trigger these charges have been satisfied.
Also remember that interest accrues daily and depending on what the actual amount owed is this may not be a very large payment. For example, for an amount of £10,000 the daily interest is around £2.30 and it would only accrue from the time the contact says it would, such as the date the payment was due but was delayed.
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You would be very unlikely able to justify charging an immediate rate of 8.5% on the whole amount – this is likely to be considered a penalty clause which is illegal and unenforceable under UK law. The law allows you to charge ongoing interest on late payments and this would be at the rate you have specified but such a large interest charge on the whole amount is very unlikely to be considered fair or unenforceable. What you can purse them for is daily interest rate from the date the payment is late up until the date it is paid. Hope this clarifies?
Sadly it does not work that way. According to your analogy you could say in a contract that you would charge them 1000% straight away but just because they agree to it and sign it does not mean it is fair, reasonable and payable. Interest is there to cover for a potential loss to you as a result of not receiving the payment in time. So if they had paid you then you could have placed the money in a bank account and earned interest on it but you have bene unable to do so due to the late payment. So the losses would accrue daily from the time the payment was due, you would not have suffered an immediate loss of a whole year’s worth of interest and if you try to claim that straight away then that would quite likele be a penalty clause
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This will explain the interest rules better:
What you may be referring to is liquidated damages, but you need to be very specific about what damages you are trying to claim for and in your case you have not done so – you are simply relying on an interest clause and using it to charge interest without actually being able to show liquidated damages: