26/02/2018

Who would have believed it? A law to make sure organisations pay their suppliers on time came into force today (26 February 2018).

But will The Late Payment of Commercial Debts (Amendment) Regulations 2018 really make a difference?

The new regulation clarifies that business representative bodies are able to challenge the use of certain grossly unfair contractual terms and practices in relation to contracts where the Late Payment Act applies.

The Late Payment Act created a statutory framework for tackling late payment in commercial transactions, by giving suppliers a right to at least 8% interest a year on overdue payments for goods or services, plus a fixed sum and reasonable costs of recovering the debt.

The new regulations expand the existing ability for representative bodies to challenge contractual terms on behalf of SMEs with the aim of addressing the imbalance of power between SMEs and larger firms when entering into a contract by making it more likely that unfair contracts will result in a challenge.

It allows any business to approach representative bodies for assistance and such bodies will have the flexibility to decide whether or not to take a case forward.

If it becomes easier for disputes around unfair contractual terms and practices to be taken to court, the courts will potentially have an increased opportunity to decide whether terms and practices should be considered grossly unfair. In the longer term this could help to clarify the meaning of ‘grossly unfair’ for the wider business community.

I’m sure we haven’t seen the last of this one, so watch this space.