The Late Payment Of Commercial Debts (Interest) Act 1998 is – not a particularly snappy title!  However, the legislation was introduced to right what had been a very common place injustice – the failure by some businesses – often those in a dominant position to promptly pay their debts.

The New Law:

• Applies to all commercial contracts entered into since 7th August 2002 and some contracts before that date.
• Commercial contracts means all contracts for the supply of goods and services where both purchaser and supplier are acting in the course of their business – contracts to or between domestic consumers are therefore excluded.
• The statute implies into all relevant contracts a term that all outstanding debts will carry simple interest @ 8% above bank base rate.  Bank of England rate applicable at 31.12 or 30.06 in the year to which interest started to run.
• Interest will start to run from the date of contractual entitlement to payment – or if the contract is silent then 30 days from the later of either performance of the contract or notification by the supplier of the amount of the debt (for example delivery of the invoice)
• Significantly, once the claimants entitlement to interest starts to run they are in  addition allowed to claim a fixed penalty sum on a sliding scale as follows:-

Debt < £1,000 – the fixed penalty is £40
Debt £1,000>> - £10,000<< the fixed penalty is £70
Debt £10,000 >> the fixed penalty is £100

The Courts are given an overriding discretion to dis-allow the penalty interest rate and fixed penalty if they feel that to do so is just.  The legislation conditions “anti-avoidance” provisions so that contractual clauses purporting to exclude the operation of the act will generally be void.

We are able to offer specialist advice.

Call 01323 720142 now for a consultation with a specialist Solicitor or a Lawyer at Lawson Lewis & Co.

Please contact:

Steven Judge (Eastbourne) (01323) 748754 - E-mail