Legal
This month we return to Clause 21 which has four sub- clauses. Last month Clause 21A was covered and this month the remaining sub-clauses B, C and D are covered Know your BIFA STC 2021: Clause 21 (sub-clauses B to D)
occasions when these rights will be very important and the Company will want to be able to use them. Comment on Clause 21(D) Until 2002 there was no legal right to interest on overdue charges unless the right was claimed by contract or unless interest was claimed when litigation was begun – London Chatham and Dover Railway v South Eastern Railway [1893] . The harshness of that situation was remedied by the Late Payment of Commercial Debts (Interest) Act 1998. The right to interest under the 1998 Act was introduced in stages according to whether the debtor or creditor was a small business, a large business or a public authority (all as defined in the Act) but by August 2002, all stages of implementation of the Act were completed. Thus, the Act refers to all commercial debts but not to debts owed by natural persons when they are consumers. Clause 21(D) merely states that the 1998 Act applies to sums due from the Customer. The 1998 Act would still apply if Clause 21(D) did not exist but it would not apply if Clause 21(D) provided an alternative remedy for interest. The rate of interest is fixed by Late Payment of Commercial Debts (Rate of Interest) Orders and that, introduced in 1998, fixed the rate of interest at 8% above the official dealing rate per annum, otherwise called the base rate of the London clearing banks, which varies according to decisions made by the Bank of England and which is announced in the financial media. Thus, the applicable rate of interest is subject to variation. Discretion must be used when adding interest to the amount of an overdue debt and much will depend on the commercial relationship between the BIFA Member and its debtor. In some circumstances, the right to claim interest on overdue debts without resorting to litigation is a useful benefit.
Clause 21 (sub-clauses B to D) Clause 21(B) In the event of any failure by the Customer to make full and punctual payment of any sum payable to the Company (in accordance with 21(A) above): (i) Any and all other sums properly earned by and/or otherwise due to the Company (but which, but for this Clause 21(B), would otherwise not yet be payable by the Customer, whether by virtue of an agreed credit period or otherwise) shall become immediately payable in full; and immediately payable shall be paid to the Company in cash, or as otherwise agreed, and without reduction or deferment on account of any claim, counterclaim, or set-off. (ii) Any sum thereby becoming Clause 21(C) No omission to seek compensation for breach of 21(A) and (B) above by the Company shall constitute a waiver or release to the Customer from any liability under 21(A) and (B) above during the application of these terms unless agreed in writing by authorised officers of the Company and Customer. Clause 21(D) The Late Payment of Commercial Debts (Interest) Act 1998, as amended, shall apply to all sums due from the Customer. Comment on Clause 21(B) This sub-clause goes on to develop the concept of time being of the essence and allows action to be taken in the event of any late payment of sums due and owing. It serves to extend the right of the Company to be paid any sums that at the time of the breach have not
been paid but are not as yet due. Therefore, even if credit has been afforded to the Customer, this will not be effective against this new sub-clause as the failure to pay due sums will mean that all sums, whether due and owing or not, will be payable immediately and on the same basis as those sums that were due and owing under Clause 21(A). This type of clause is known as an acceleration clause, in that it provides for sums becoming due when ordinarily they would not be so under the terms agreed. Comment on Clause 21(C) This sub-clause allows flexibility to the Company to decide when to invoke 21(A) or (B). Generally, if a contractual term is not enforced and there is no provision dealing with waiver, then the next time that term is breached and a party seeks to enforce it, the courts will not allow enforcement as the claimant will be taken to have waived the right to rely on the clause. This Clause 21(C) provides that there shall be no waiver if the Company does not rely on its rights under Clauses 21(A) and (B) unless the Company and Customer agree to the waiver in writing. This will be very helpful to the Company as it is not always necessary to rely on rights owing to late payment but there are
“ Clause 21(B) goes on to develop the concept of time being of the essence and allows action to be taken in the event of any late payment of sums due and owing
16 | January 2024
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