This act, which is by now a well-known way of obtaining preferential interest where commercial debts are paid late (the applicable rate being 8% over base and usually therefore far more beneficial than the often low rates in contracts) has had something of a makeover.
It still only applies where any rate agreed in the contract is not a substantial remedy, which does rule it out of some situations but there are a number of changes coming into force on 16 March 2013 for contracts entered into after that date.
Payment periods, which will be well known to construction practitioners, make an appearance in commercial contracts now, with interest starting to run automatically if the period for payment is not specified (or if it is specified but is "grossly unfair". The date interest runs from will be 30 days from the latest of:
- receiving the supplier's invoice;
- receiving the goods or services;
- verification or acceptance of the goods or services (the period allowed for which is also regulated)
Interest-free periods cannot be extended beyond 30 days in contracts entered into with Public Authorities.
Also, as well as the interest and the very modest fixed sum that can be recovered pursuant to the Act (but is often ignored) the new Regulations allow the Claimant to recover their reasonable costs in attempting to recover the debt and any unreasonable attempt to exclude recovery of those costs will be of no effect.