Legal Question in Business Law in California

late fee enforcement

My partner and I recently paid off the purchase of our business. (16 monthly payments)

The seller never once requested late fees to be paid while we were making payments. None of the payments were more than 5 days late and at least 50% of the total monthly money due was recieved on time each month.

Following our ''free and clear'' last payment the seller sent us a bill requesting that we pay a very modest late fee.

Is he entitled to it even though he never requested it on a month ot month basis?

thanks Guru!

UB


Asked on 9/11/02, 3:31 pm

1 Answer from Attorneys
Bryan Whipple Bryan R. R. Whipple, Attorney at Law

Re: late fee enforcement

When the contract does not expressly provide for a late fee, the creditor is not entitled to any fee which amounts to a penalty. The creditor is, however, entitled to ordinary interest at the contract rate (or if none is specified, at the legal rate) on the amount not paid on time for the period that it was delinquent.

The distinction is that a 'late fee' is a penalty to which the parties have not agreed, either expressly or by implication; but a promise to pay contract-rate (or legal-rate) interest on overdue balances is easy to infer since the parties have agreed to payment deadlines and, when they are not met, the creditor is harmed to the extent of the aforesaid amount of interest.

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Answered on 9/11/02, 5:01 pm


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