B2B Payment Terms in the UK: Legal and Commercial Drafting Checklist on Late Payment, Interest, Invoicing, Set-off, Suspension, Termination and Insolvency Restrictions

Published by a LexisNexis Commercial expert

Checklists

This Checklist highlights the principal points and potential pitfalls to address when preparing and agreeing a payment clause in a business to business contract, covering late payment as well. For a model clause, see Precedent: Payment clause-commercial contracts. Guidance on late payment is in Practice Notes: Penalty interest rates in commercial contracts and Late Payment of Commercial Debts (Interest) Act 1998, including, in particular, the sections on:

Contracts, organisations and debts subject to LPCD(I)A 1998
Calculating the statutory interest
Express terms for late payment in place of statutory interest
Meaning of 'grossly unfair'

Price and payment terms in a contract are often closely linked. When using this checklist, also refer to: Drafting and negotiating a price clause-checklist. Legal issues, general comments and what to watch out for are noted.

Late payment legislation

The Late Payment of Commercial Debts (Interest) Act 1998 (LPCD(I)A 1998) allows all businesses and public sector bodies to claim statutory interest on late payment of commercial debts. Under the LPCD(I)A 1998, an implied term provides that qualifying debts accrue simple statutory interest. Despite this implied term, the parties remain at liberty to set their own terms specifying a remedy for late...

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Web page updated on 26/05/2026

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