Legal basis for prompt payments
If cashflow is the lifeblood of commerce then The Late Payment of Commercial Debts Regulations offers a much welcome shot in the arm.
From 16 March 2013, if payment for goods or services has not been made within 30 days, late payment interest begins to accumulate. Helpfully this applies to both in the private sector and with public authorities.
The start date for the 30 day period is the latest of the date of receipt of the invoice, the delivery date for goods or services, and verification or acceptance of the goods or services.
Some additional flexibility is offered in the private sector since parties are free to negotiate a payment date up to 60 days provided that this is not “grossly unfair” to the supplier.
“Gross Unfairness” is a test introduced by the regulations for the first time, and although some guidance has been offered for the factors to be taken into account, courts will be left to grapple with the practical application.
The regulations include provisions for recovery costs and the appropriate interest rate, and offer much needed updating of the existing legislation. However, they are no substitute for well drafted contractual payment provisions coupled with an active credit control function.
For more guidance please contact our commercial team on 01245 216100.