B2B Contracts and late payment interest.

sanaxe1 · 25 Jul 2017 at 10:44

Hey, Just looking for some advice I had a large company use my service and i charged them £1000 for said service. I gave them 30 days to make payment but they are now at 90 days so they are 60 days late.

In the contract they signed it stated a 2.25% per day late payment charge ( not compound ). This means that the late fees are £1350. This is obviously quite abit and larger than the original amount owed, however they are refusing to pay these fees stating they are excessive. The late fee was supposed to work as a deterrent to stop companies paying late as it really does affect my cashflow as after my costs i only really keep around £400.

When they were 1 month late i offered to cancel all late fees if they paid within 5 days. They did not do this and as such the bill is racking up. I have rang them numerous times , emailed them numerous times and my invoice software automatically sends late reminders to them. Finally after 2 months late on top of the original 1 month they have agreed to pay the original amount of £1000 but not the fees, but as far as i'm concerned they agreed to a contract and i offered goodwill to cancel these charges but they ignored it.

So my question is if i was to take this to small claims court do you think the court would say that my charges are excessive and unenforceable?

Sliver · 25 Jul 2017 at 10:51

sanaxe1 said:
So my question is if i was to take this to small claims court do you think the court would say that my charges are excessive and unenforceable?

I think if you have a written contract signed by them stating what you have said in your post, then they don't have a leg to stand on. Take them to court and claim what you are rightfully owed. If you don't have a written contract signed by them then I think you are screwed.

Ace Modder · 25 Jul 2017 at 11:05

Have they stated why they didn't pay in a timely manner?

sanaxe1 · 25 Jul 2017 at 11:08

Sliver said:
I think if you have a written contract signed by them stating what you have said in your post, then they don't have a leg to stand on. Take them to court and claim what you are rightfully owed. If you don't have a written contract signed by them then I think you are screwed.

I do have a signed contract by the person who made the booking from their company.

dowie · 25 Jul 2017 at 11:11

probably best to speak to a solicitor about this and get your contract checked over(given this is presumably something you're going to use in general), ask the solicitor if those daily interest charges are likely to be 'reasonable' - they don't seem very reasonable to me tbh...

would a better way to handle it be to have say a 4% interest charge over your bank rate (not a daily one!) and then a fixed charge/costs for each monthly reminder letter you send, or any other fees you incur in pursuing them - again I'd get a solicitor to check this stuff over

you never know though, if you were to pursue the 'small claims' thing they might not want to spend time fighting it leading to them settling or not turning up and you winning by default

sanaxe1 · 25 Jul 2017 at 11:14

Ace Modder said:
Have they stated why they didn't pay in a timely manner?

First the person who made the booking was off with a bereavement so the finance deportment wasn't made aware of the invoice.

They then said i had not provided them with my bank details. This was incorrect as i provided them with my bank details 2 months before they even used my service when i filled out there supplier form.

Sliver · 25 Jul 2017 at 11:15

sanaxe1 said:
I do have a signed contract by the person who made the booking from their company.

Cool. Then you should be fine.

Vanquish-Storm · 25 Jul 2017 at 11:25

There is some information here: https://www.gov.uk/late-commercial-payments-interest-debt-recovery

The interest you can charge if another business is late paying for goods or a service is ‘statutory interest’ - this is 8% plus the Bank of England base rate for business to business transactions. You can’t claim statutory interest if there’s a different rate of interest in a contract.

I doubt they could claim unfair terms but it sounds like it is decided on a judge to judge basis : https://www.gov.uk/unfair-terms-in-sales-contracts/unfair-business-contracts

sanaxe1 · 25 Jul 2017 at 11:51

Vanquish-Storm said:
There is some information here: https://www.gov.uk/late-commercial-payments-interest-debt-recovery

I doubt they could claim unfair terms but it sounds like it is decided on a judge to judge basis : https://www.gov.uk/unfair-terms-in-sales-contracts/unfair-business-contracts

Thanks for the information.

booyaka · 25 Jul 2017 at 11:52

I agree with others - speak to a solicitor if you can.

2.25% a day does seem excessive to me. At the end of the day, if you went to court over it, could you say that £1350 of late charges on a £1000 bill is reasonable?? Would be hard i think.

I would send a final letter recorded delivery, demanding full payment of the £1000 and a month's late charges or you will seek legal advice from this point on. Give them 10 days to pay. If that doesn't move them on, then solicitor would be the next stage.

LeMson · 25 Jul 2017 at 12:05

https://www.youtube.com/watch?v=jVkLVRt6c1U

Seem's like good advice, hello court system!

sanaxe1 · 25 Jul 2017 at 12:20

booyaka said:
I agree with others - speak to a solicitor if you can.

2.25% a day does seem excessive to me. At the end of the day, if you went to court over it, could you say that £1350 of late charges on a £1000 bill is reasonable?? Would be hard i think.

I would send a final letter recorded delivery, demanding full payment of the £1000 and a month's late charges or you will seek legal advice from this point on. Give them 10 days to pay. If that doesn't move them on, then solicitor would be the next stage.

I am conflicted my self on how reasonable it is as i never expected a late bill to get this large as these are the first company to be late making payment. As i said before i put this large daily interest rate in the contract as a deterrent from paying late as i think 30 days is plenty of time to pay especially as companies usually book my services months in advance giving them ample time to be able to afford the bill.

I also think that if they didn't want to pay such fees they shouldn't of signed the contract as it was clearly stated under the Fees & Charging section. Its not as if im pulling a wonga and targeting vulnerable people who might not understand the amount they would have to pay back. These are a large company who have a legal department so surely they have somebody who is able to go through contracts to see if they agree to the terms , there was no rush for them to sign the contract and the contract was emailed to them so they could have easily forwarded it on for a review.

I think for me it also comes down to that there has been no apology for being late and they have spoken to me like **** every time i have spoken to them.

kayomani · 25 Jul 2017 at 12:24

booyaka said:
does seem excessive to me. At the end of the day, if you went to court over it, could you say that £1350 of late charges on a £1000 bill is reasonable?? Would be hard i think.

Those payday loans people get away with it..

LeMson · 25 Jul 2017 at 12:45

kayomani said:
Those payday loans people get away with it..

Seems far cheaper than a payday loan too!

doogs · 25 Jul 2017 at 13:11

You should have something in your terms and conditions that refers to the "Late Payment of Commercial Debts (Interest) Act 1998.

sanaxe1 · 25 Jul 2017 at 13:14

doogs said:
You should have something in your terms and conditions that refers to the "Late Payment of Commercial Debts (Interest) Act 1998.

*My Company* reserves the right to charge You interest of 2.25% of the original invoice amount per day which both Parties agree shall be a sufficiently substantial remedy for the purposes of the Late Payment of Commercial Debts (Interest) Act 1998.

Thats what i have in my contract.

Vanquish-Storm · 25 Jul 2017 at 13:32

sanaxe1 said:
*My Company* reserves the right to charge You interest of 2.25% of the original invoice amount per day which both Parties agree shall be a sufficiently substantial remedy for the purposes of the Late Payment of Commercial Debts (Interest) Act 1998.

Thats what i have in my contract.

Plus you have the argument that they have read that contract, signed to agree it and not questioned the charges. There was nothing stoping them from mentioning them or negotiating a different deal.

dowie · 25 Jul 2017 at 13:45

sanaxe1 said:
*My Company* reserves the right to charge You interest of 2.25% of the original invoice amount per day which both Parties agree shall be a sufficiently substantial remedy for the purposes of the Late Payment of Commercial Debts (Interest) Act 1998.

Thats what i have in my contract.

did you have a solicitor create these contracts you get your clients to sign?

sanaxe1 · 25 Jul 2017 at 14:00

dowie said:
did you have a solicitor create these contracts you get your clients to sign?

I used a template and changed details as was appropriate to me.

ahar · 25 Jul 2017 at 18:32

Can't see a judge enforcing terms like that. Make them a final sensible offer (maybe £1000 plus £200 late fees) and then take them to court if they refuse. Make sure you put in your claim the correspondence and your very fair offer of a discount to the fees they signed up to and a good methodology for the costs to you of the late payment to justify the late payment charge. I only work with very large corporates but the common sense approach always seems to work