The Government continues its drive to improve terms for suppliers to big business particularly to public sector purchasers.
30 day payment terms will be a legal requirement by March 2013. A default interest rate of 8% above base (unless parties agree otherwise) is already imposed by the Late Payment of Commercial Debts (Interest) Act 1998 and the Late Payment of Commercial Debts Regulations 2002. Further restrictions on payment terms are required by the European Late Payments Directive and these must be implemented into English law by 16th March 2013.
The directive requires payment terms of 30 days, which can be extended to 60 days in certain circumstances. Any longer terms must be expressly agreed and not be “grossly” unfair to the creditor. Terms that do not comply with the directive will be unenforceable and may give rise to claims for damages from the creditor.