Archive for March, 2010

Interest from Customers who Pay Late – BTB

In the current economic climate, business customers often deliberately delay payment of invoices. Protect your business and improve your cash flow, by exerting your right to claim interest on late payments.

Is an interest clause required in the contract?

No. There is no requirement to have an interest clause in your contract. You have a statutory right to claim interest on late payments from a business customer (BTB). The statutory interest rate applicable is the Bank of England Base Rate + 8%. At the time of writing the currently applicable rate is 8.5%.

What interest rate can be specified in the contract?

You can choose which rate shall apply. This can be a number i.e. 7%, or a reference to an index i.e. the European Central Bank base rate, or a combination of both i.e. the Bank of England base rate + 2%. The interest rate specified can be higher or lower than the statutory rate.

Does the contractual or the statutory interest rate apply?

If you specify an interest rate in your contract, the  statutory rate will  not apply, even if the rate specified is lower.

Disadvantages of having a contractual interest clause

1. By specifying an interest rate in your contract you are inviting a business customer to negotiate a lower rate.

2. If you have a weaker bargaining position, you may have to agree to a rate much lower than 8.5%.

3. Time and money could be wasted on lengthy discussions about which index to use and the % rate applicable.

4. Many business customers are not aware of your rights. Saying nothing about interest in the contract can result in avoiding protracted negotiations on this issue, and the statutory rate will apply automatically.

Can a business customer exclude your right to charge interest in the contract?

No. Such a clause will be invalid and unenforceable.

Do you have to enforce your right to claim interest?

No. It is up to you to decide, if, and when, it is appropriate to enforce your right to claim interest from business customers.

Calculating interest

Your terms and conditions should state when payment is due i.e. within 14 days of the date of invoices. Interest will be calculated and payable from day 15.

As a matter of good practice send your customer a payment reminder before exercising your right to claim interest. They may simply have overlooked your invoice!

IMPORTANT NOTE: please note that the above only applies to BTB contracts.


If you need assistance with interest clauses or your terms and conditions generally contact:

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SaaS Agreements – SLAs – Essential Elements

Have you ever wondered what should actually be included in a SaaS service level agreement, commonly referred to as a SLA?

SaaS Customers thinking of purchasing SaaS software applications – software delivered via the Internet – are often unaware of what terms should be included in the SLA.  Jargon in the SLA can seem like a foreign language and SaaS customers will often struggle to understand the terms of the SLA.


A SLA forms part of the SaaS agreement and can be contained in a separate schedule or in the main terms and conditions of the SaaS agreement. The SLA contains:

  • Details about the availability of the SaaS software and services;
  • Technical details about the hosting;
  • Details about the support and maintenance of the software itself.


Most SaaS customers do not accept a SaaS supplier’s SLA and may even try to impose their own SLA. Customers often review the content of the SLA, or have it reviewed by a legal expert. This can make the process painful and time consuming for the SaaS supplier, who will need to deal with numerous queries. It is therefore advisable to provide some degree of detail in a SLA sto avoid unnecessary time adding or negotiating details requested by SaaS customers.

Minimum Requirements

SLAs should generally contain the following provisions, where appropriate:

  • Guaranteed availability of the services and software
  • Timing of and prior notice of maintenance;
  • Description of the security provisions at the hosting centre and the technical infrastructure;
  • Problem response and resolution times;
  • Customer support description and support hours;
  • Provision of service availability reports;
  • Backup of customer data;
  • Disaster recovery provisions;
  • Right to terminate for breaches of the SLA;
  • Service credits for breaches of the SLA.

Commercial Considerations

The degree of detail that a SaaS supplier provides in a SLA will depend upon:

  • How much a Saas customer pays for the SaaS software and services;
  • Whether the SaaS software is business critical i.e. is used for online banking;
  • What is standard in that particular business sector.


Due to the unique nature of SaaS you should seek specialist legal advice on the content of a SLA whether you are a Saas supplier or a SaaS customer to ensure that your rights are adequately protected.


Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:

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SAAS, ASP, software on demand – confused?

What is SAAS?

This is the abbreviation for “software as a service”.  You may know this under another name, for example ASP services (application service provider) or software on demand. These names all refer to the same thing – and simply mean that you are accessing and using software via the Internet.

How is SAAS different from a standard software licence?

A SAAS agreement differs from a standard software licence, as you will not usually receive a physical or installed copy of the software. Also  no ownership in the software will be transferred to you.  You are simply given the legal right to access and use the software for the length of the software licence  granted to you.

Is a service level agreement (SLA) a software licence?

No. A service level agreement sets out the services being provided in addition to the right to use the software, namely the hosting, support and maintenance services.

Due to the unique nature of SAAS agreements to seek specialist legal advice on the content of such agreements. This will ensure that your rights are adequately protected, particularly in the event of things going wrong.


For assistance with SAAS, ASP, software on demand contracts,  SLAs or any other IT legal issues contact me at:

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