# Late payment clause



## rino1494 (Jan 31, 2006)

Alot of my work is for private developers and with the economy the way it is, lots are not selling like they used to. Developers are getting slower with their payments and are beating you up more to get more for their money. Alot of them will hold money back as an incentive for you to come back and make needed repairs, such as grass not growing, erosion issues, etc... We always make those repairs anyway, because we guarantee our work, but I just do not like waiting for our money in doing so. 

In my contracts I state payment terms about being 30 days net, interest, blah blah blah. What I am looking to come up with is a late payment clause that will exclude me from making needed repairs or something that will give me leverage and gives them an incentive to pay on time.

Thoughts and ideas ??


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## SmithsResurfaci (Jan 27, 2011)

Unless things have changed since I last looked here in Oklahoma.You can charge 1.8% over the net 30 payment clause that is due after they have failed to pay for the initial 30 days.After 60 days you can add another 1.8% to the already added 1.8% from the previous net 30.Depending on the price of your bill this could bring anywhere from 30.00 extra to 3k extra.As for a clause to limit warranty or anything im not 100% sure about that. However I surely would not go back and warranty anything for anyone that failed to pay with for 60 days and I had to bring them to court.I had to go after one apartment complex of 400.00.Not much but still alot. 400 is 400 in my book and because I am a small business they thought they could buffalo me.Sorry I hunt buffalo and deer.I have guns and know how to use them.I went to my laywer(company gun) turned my paper work over to him with 150.00. filed lean on apartment complex. Owner had to call management company to find out why there was a lean on his property because he was trying to use it as collateral for a loan to invest in another property.They had to pay my 1.8% x's 2 on 425.00 plus the 150.00 to the lawyer and the lean release as well as the court costs for filing.

One bridge burned maybe.A lesson learned maybe again.Money in my bank.Yes sir and I have not been called for warranty issues but I dont want a call to do any work from them either because it wont be offered.Cut the bad from the bunch and still keep making money.


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## Upchuck (Apr 7, 2009)

I like to include a payment schedule. Sewer main work is considered done as soon as it has passed air test with town inspector. Water work is done as soon as tested & chlorinated. I bill for loam & seed as soon as seeding is done. 
I don't guarantee grass growth but will repair problems due to erosion. 

Tough times for everyone out there but it gets annoying chasing guys for money.


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## rino1494 (Jan 31, 2006)

Yeah, I include payment terms in my contract. Payment due upon completion of specified line item, Net 30 days, 1.5%. I charge interest too, but like most, they do not pay. Doing developments, townships do a walk through and inspect before dedication and usually come up with a punch list. We always go back and fix them as part of the contract unless there is something that was not part of the original plans. As far as guaranteeing grass, that is done for detention basins. Townships will not accept if the grass is not growing. Over the years, we have learned from our mistakes and have learned tricks to make sure things go our way so that we do not have to go back and fix them later. You will get heavy rains that cause gullies and you will get sun light that will bake grass under an erosion blanket, so you gotta take of that stuff. After all, our name is tied to the project.


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## jmacd (Jul 14, 2009)

Do they hold back a retainage? Like 10% anyways?


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## Deckem (Jan 27, 2011)

Here is what I use, different state though. 
 _ 
In the event of default or late payment, buyer agrees to pay sellers, attorney’s, collection, court cost, and late fee penalty ( up to $ 100.00 ) per day plus interest on the unpaid balance at a rate equal to the maximum rate permitted under applicable by state law for this type of transaction, but in no event more than one and one half percent (1 ½) per month. In the event of default by the seller, the buyer reserves the right to hire another contractor to finish to project. The unpaid balance of the contract will be used to pay for the completion of the unfinished work, materials, and other reasonable expenses. Any money owed to the seller will not be paid until the project is completed. In the event that the unpaid balance is not enough to cover the cost of finishing the project, the seller will be responsible for that cost.
G) *All warrantees take place from the time that the final payment is made. No warrantee work, maintenance items, or promotional products or services ( free items given to the customer) will be performed before the final payment. If the payment *
*Schedule is not followed in accordance with this contract all guarantees are null and void and buyer will be considered in breech of the contract ,* at which time the contract will be terminated. Payment “in full” placed in an escrow account with sellers attorney will be required to reinstate the contract and a late payment fee will be applied.
H) When a payment schedule states that a payment is due ( “ at start”, “at roof”, “at electrical”, ect.) it is understood that the payment labeled as such, will be paid at the start of that phase of the project & is considered under sec. G of the these terms.


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## Upchuck (Apr 7, 2009)

> posted by rino
> 
> As far as guaranteeing grass, that is done for detention basins. Townships will not accept if the grass is not growing. Over the years, we have learned from our mistakes and have learned tricks to make sure things go our way so that we do not have to go back and fix them later. You will get heavy rains that cause gullies and you will get sun light that will bake grass under an erosion blanket, so you gotta take of that stuff. After all, our name is tied to the project.


Don't get me wrong. I go back to fix erosions & work with people if grass doesn't grow well but I expect to be paid after the seeding is done. 

I do like what deckem posted & will have to insert that clause in my contracts.


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## Rob PA (Aug 30, 2010)

I have tried the late penality. I find it doesnt work. Most still drag it out or make excuses to send a invoice in they "lost" it. I told the one they all must use the same cpa since everything gets lost.

I do agree thou. Im not going back to look at anything if it took them 60-90 days to pay. After the last walk thru is done and no complaints...work is considered statisfactory. None of this after 6 months there is a scratch on the wall and you need to fix it crap.


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## PipeGuy (Oct 8, 2004)

rino1494 said:


> Alot of my work is for private developers...Alot of them will hold money back...I am looking to come up with...that will give me leverage and gives them an incentive to pay on time.Thoughts and ideas ??


A prompt payment discount is about the only thing that gets people to pay on time; and that's only those who actually HAVE the money to pay in the first place. I think 2% is about the minmum effective discount rate. Below that folks just as soon hold onto their cash than pay. Those who don't actually have the money to pay don't much care what the payment terms are; you'll get paid when they feel like it.

Probably the most important aspect of developing a payment clause, be it for progress payments or final payment, is doing a good job of specifying when payment is due. That can sometimes be surprisingly harder than one might think. The other part of putting teeth into the payment clause is making sure the contract allows you to stop work and pull off the job without penalty until payments are caught up (if you can manage to put your customer on the hook for "delay and re-mob" costs more power to you but I think that's probably pie in the sky). I can't tell you how many contracts I've read (and some I've signed) that, if push came to shove in a court of law, don't really say that payment is ever due. And any kind of "paid when paid" clause that you allow in the contract has to be conditioned with some kind of language that allows you to stop work without penalty if lack of payment is no fault of your own. I'll try to dig up some specific language and post it later.


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## dayexco (Mar 4, 2006)

the only clause i have is...i introduce them to my friend "vito" from detroit


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## Upchuck (Apr 7, 2009)

> posted by pipeguy
> 
> A prompt payment discount is about the only thing that gets people to pay on time; and that's only those who actually HAVE the money to pay in the first place. I think 2% is about the minmum effective discount rate. Below that folks just as soon hold onto their cash than pay. Those who don't actually have the money to pay don't much care what the payment terms are; you'll get paid when they feel like it.


I've been giving guys enough of a discount to get work. You're right about it working. We pay all our bills on time but I always pay bills with that discount first.


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## rino1494 (Jan 31, 2006)

PipeGuy said:


> A prompt payment discount is about the only thing that gets people to pay on time; and that's only those who actually HAVE the money to pay in the first place. I think 2% is about the minmum effective discount rate. Below that folks just as soon hold onto their cash than pay. Those who don't actually have the money to pay don't much care what the payment terms are; you'll get paid when they feel like it.
> 
> Probably the most important aspect of developing a payment clause, be it for progress payments or final payment, is doing a good job of specifying when payment is due. That can sometimes be surprisingly harder than one might think. The other part of putting teeth into the payment clause is making sure the contract allows you to stop work and pull off the job without penalty until payments are caught up (if you can manage to put your customer on the hook for "delay and re-mob" costs more power to you but I think that's probably pie in the sky). I can't tell you how many contracts I've read (and some I've signed) that, if push came to shove in a court of law, don't really say that payment is ever due. And any kind of "paid when paid" clause that you allow in the contract has to be conditioned with some kind of language that allows you to stop work without penalty if lack of payment is no fault of your own.


I was actually thinking today about a 1-1.5% discount if payment is received within 7 days. 



PipeGuy said:


> I'll try to dig up some specific language and post it later..


That would be greatly appreciated :thumbsup:


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## dayexco (Mar 4, 2006)

right now, i'd like to be entertained by rino's trumpet player...solo performance, you know


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## PipeGuy (Oct 8, 2004)

dayexco said:


> right now, i'd like to be entertained by rino's trumpet player...solo performance, you know


 I just hate being on the outside of an inside joke.


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## dayexco (Mar 4, 2006)

jason,

send him the link


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## rino1494 (Jan 31, 2006)

dayexco said:


> right now, i'd like to be entertained by rino's trumpet player...solo performance, you know


HAHAHAHA :laughing:


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## rino1494 (Jan 31, 2006)

PipeGuy said:


> I just hate being on the outside of an inside joke.


PM me your e-mail address please......oh and you need to keep young eyes and ears away from your computer.


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## Moxley-Kidwell (Jan 28, 2011)

Rino,

We are in the same boat with some of our clients. Some are always 60 days plus when there contract says they will pay on the 30th day. Unfortunately there are so many contractors waiting in line to do any available work we have to be real careful about burning bridges. On the commercial side of things we have a lot smaller customer base to work with than the residential side. If you need to do something on the legal side it usually will take the extra 30-60 days to start. If you are getting paid then it may be better to keep the customer happy and without a bad taste in there mouth from legal type action. Of course if you aren't getting paid then start the bone breaking.

I also see the need to make sure the contracts are strong just in case anything has to go to the lawyers, but no one wins but the lawyer in that case.

Thats my 2 cents, not that it helped any. Knowing there are others in the same boat helps sometimes, and we can ***** to each other.

Good luck!!


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## PipeGuy (Oct 8, 2004)

rino1494 said:


> ...In my contracts I state payment terms about being 30 days net, interest, blah blah blah. Thoughts and ideas ??


I'm curious - what percentage of the time is "your contract" a document you wrote as compared to something your customer gave you to sign? For me it's less than 5% of the time. 

It's my experience that almost everyone wants their proposal to wind up being "the contract". I think from a contractual standpoint that's a poor, if not outright unacceptable, idea. Contract agreements need to cover a lot of stuff in order to properly adress all the various risks associated with agreements between developers/contractors/subcontractors. All that stuff can't possibly be packaged into an attractive proposal. I think a proposal shouldn't wind up looking more like a list of all the ways you're worried the customer might try to screw you (and the steps you'll take to fend off his unwelcome advances should he try do so) then it does a description of how your company will help him make the most money he can on his project. 

At the risk of dating myself I'll say that successfully negotiating a sitework/utility contract is a lot like trying to dance to Zeppelin's "Stairway To Heaven" - it can be done but there's a real chance of bombing out just before the finale when the tempo gets kinda' awkward. For that reason alone I leave dancing around things like late payment penalties, interest and delay damages to the very end rather than disturb the nice slow part at the beginning when both parties are trying to snuggle up.

Basic payment terms need to be in the proposal; how often you expect to be paid, the basis of the value of each payment and the time frame for final payment. Leave the finer details for the contract.


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## Rob PA (Aug 30, 2010)

what i have found is calling them up and just asking, but staying professional at all times

I just call up if it goes past 30 days and say hey just checking in to see if you got the invoice and had a chance to process. Now if they say no. I say ok ill resubmit but please let me know.

I recently had a reality go 45 days out. I call hey did you get it "no". I sent in another invoice next day. 2 further weeks go by..now we are at 2 months. Call them up no return call to VM. Email. No response. Red flags go up when you cant get any answers. My wife calls and asks for accounting. And finnaly get a call saying it will be sent out monday. Too bad we still have another one pending. HA!


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## ElIngeniero (Feb 7, 2008)

Our proposals are typically about like Pipeguy mentioned--we illustrate the value of our work first and foremost and then, at the end, lay out a few payment terms and exclusions. 

However, once things get to the contract phase, we are provided with proof of funding for the project--whether it be from a bank or a photo of a suitcase of money. There are too few successful projects to pay for a single nonpaying, unsuccessful project.

I've lost more than 1 job because of this--but in my mind...if they aren't willing to show that they have the financing to do a job, I don't wish to waste anymore time with them anyhow.


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## ElIngeniero (Feb 7, 2008)

Rob PA said:


> what i have found is calling them up and just asking, but staying professional at all times
> 
> I just call up if it goes past 30 days and say hey just checking in to see if you got the invoice and had a chance to process. Now if they say no. I say ok ill resubmit but please let me know.
> 
> I recently had a reality go 45 days out. I call hey did you get it "no". I sent in another invoice next day. 2 further weeks go by..now we are at 2 months. Call them up no return call to VM. Email. No response. Red flags go up when you cant get any answers. My wife calls and asks for accounting. And finnaly get a call saying it will be sent out monday. Too bad we still have another one pending. HA!


Also, as part of our contract, we like to prepare a document that itemizes key players from each company. IE. If I'm the project manager, I'm listed as such. I usually list my foremen and my office manager as well. The client lists their project contact and answers a questionaire that details who can authorize COs, POs, and who billings will be directed to. All phone #'s, email addresses, etc. are posted.

We send our invoices out via email now. I usually follow up within 24 hours to ensure receipt. I started doing this because I heard sooooo many times "I haven't received your invoice". It's odd--I always seem to get my vendor's invoices but USPS can't seem to deliver mine . Anyhow, at 30 days, I send out a letter and follow with a phonecall. At 45 days, I repeat. At 60 days, a different letter is sent out--basically we notify them that we will be exercising our lien rights at 90 days. At this point, I call every other day until I have a check.

We're working too cheaply today to not get paid.


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## dayexco (Mar 4, 2006)

ElIngeniero said:


> Also, as part of our contract,* we like to prepare a document that itemizes key players from each company. IE. If I'm the project manager, I'm listed as such.* I usually list my foremen and my office manager as well. The client lists their project contact and answers a questionaire that details who can authorize COs, POs, and who billings will be directed to. All phone #'s, email addresses, etc. are posted.


do you have that in a file that you would share? would be much appreciated if you can. what a great idea.:thumbup:


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## ElIngeniero (Feb 7, 2008)

dayexco said:


> do you have that in a file that you would share? would be much appreciated if you can. what a great idea.:thumbup:


Yeah i will share it...just keep forgetting when I'm in the office.


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## ElIngeniero (Feb 7, 2008)

Man I'm seeing some frustrating stuff recently...seems like work is picking up but the developers and gc's we are working for are getting more and more cut-throat. I was recently 'awarded' a hard bid project. New plans arrive just after ground breaks which change price by 38% (completely different storm network). The GC tries to hold me to original price...claims that the plans were released before bid date (yet the stamped date was a day later and our contract details the plan sheets and their dates). 

We also recently received our first check on a small development we've been working on. First bill was submitted before xmas. We were shorted on the check by the amount equal to change orders we had authorized and signed. Developer claims that he will release the change order money when he releases the retainage.....I informed him that the giant hole we had dug (undercut) wouldn't be filled until the remainder was received. I picked up the check the following day.


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## Louisg (Feb 16, 2011)

rino1494 said:


> Yeah, I include payment terms in my contract. Payment due upon completion of specified line item, Net 30 days, 1.5%. I charge interest too, but like most, they do not pay. Doing developments, townships do a walk through and inspect before dedication and usually come up with a punch list. We always go back and fix them as part of the contract unless there is something that was not part of the original plans. As far as guaranteeing grass, that is done for detention basins. Townships will not accept if the grass is not growing. Over the years, we have learned from our mistakes and have learned tricks to make sure things go our way so that we do not have to go back and fix them later. You will get heavy rains that cause gullies and you will get sun light that will bake grass under an erosion blanket, so you gotta take of that stuff. After all, our name is tied to the project.


Its a ***** ,but that 's what the courts are for. Don't be afraid to use them against losers who don't pay. Good job .


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