When can your business impose interest on outstanding accounts?

For an interest clause to be legally valid the clause cannot simply state that interest will be due. This is because contract law requires a certain level of certainty. On the other hand the clause does not have to specify what the interest rate will be. It could attach the rate to a specific bank rate, which in effect makes it a variable rate. The second condition is that the rate is reasonable. One of the rules of English common law is that a party cannot include a penalty clause in a contract. This rule looks at the substance of the clause, rather than the form. A commercial solicitor can draft an interest clause for a business that the courts will be likely to uphold, and provide legal advice if the interest owed is not paid.

In implied clause contracts (and in contracts where the express clause was not enforceable for one of the reasons above) the interest is recoverable by operation of statute. There are two different sets of statutes which deal with interest. One type consists of the Supreme Court Act 1981 and the County Court Act 1984, and deals with interest on debts which were not paid at the time proceedings were issued. The court in these situations has the right to decide what the appropriate level of interest should be, and include the sum in a judgement for payment of debt.

A much more recent statutory provision is the Late Payment of Commercial Debts (Interest) Act 1998. Under the Act a debt begins accruing interest as soon as the payment becomes due. If this date is not specified in the contract it is considered to be either 30 days after the contract was performed, or the amount to be paid was notified, which ever is later. This Act was introduced in order to deter debtors from withholding payment until days before proceedings were issued, an act which prior to this Act would not incur any liability.

For further legal advice on imposing interest on outstanding accounts, a business is advised to contact a commercial solicitor. A commercial solicitor can draft contracts to include an interest clause and provide legal advice on the new Act.

Article Source: http://www.onlinearticlessite.com

If you would like to know more about solicitors company, lawyers company or company solicitors please visit ContactLaw.co.uk solicitors and Lawyers.

Please Rate this Article

5 out of 54 out of 53 out of 52 out of 51 out of 5 

Not yet Rated