Avoid late payments and unpaid invoices with sound terms and conditions
Posted by Jonathan Lea on Nov 9th, 2010 | Last modified on Apr 12th, 2013
Last updated on April 12th, 2013 at 09:12 am
Terms and conditions should form the basis of any contract between you and your customers, enabling you to protect your rights and help recover debts.
The main late payment protective provisions that all T & Cs should contain are clauses allowing for interest to be charged and title to be retained when goods have been sold but payment has not yet been received. Remember, the right to claim interest is not compulsory even if included in your terms, but will prove to be a useful bargainning tool should you need to extract payment from a customer.
Many SMEs don’t realise that even if they do not provide provisions within their terms that the law allows them to claim interest at 8% above the Bank of England reference rate on business to business debts. The Late Payment of Commercial Debts (Interest) Act 1998 (as amended) gives the right to add this interest as soon as payment is overdue. A default period for payment of 30 days from invoice is set unless a different period has been agreed.
Having a well drafted set of T & Cs provides a business with a better chance of maintaining good cash flow through limiting your liability, whilst also giving you the contractual force to pursue customers who fail to meet obligations.
About Jonathan Lea
Jonathan is a specialist business law solicitor who has been practising for over 18 years, starting at the top international City firms before then spending some time at a couple of smaller practices. In 2013 he started working on a self-employed basis as a consultant solicitor, while in 2019 The Jonathan Lea Network became a SRA regulated law firm itself after Jonathan got tired of spending all day referring clients and work to other law firms.
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