Let delays have costs. Determined by the court to be excessive (unreasonable fine) Violation of state law interest rate cap Unable to execute Here are some safe writing methods for you. The most common way to write it: monthly percentage Suitable for 1099 contractor/service contracts. Security template: Any payment not received within 10 calendar days after the due date shall incur a late fee of 1.5% per month (18% annually) on the outstanding balance, or the maximum quotation permitted by law, whichever is lower. Key points: Give a grace period (e.g. 10 days) Add "maximum permitted by law" Clearly outstanding balance Fixed amount + percentage (harder) Suitable for B2B contracts. A late fee of $50 plus 1.5% per month on the unpaid balance shall apply to any invoice not paid within 10 days after the due date. This way of writing is more stressful, but it must be reasonable. Late fees for installment payments If it is installment: If any installment payment is not received within 5 days of its due date, a late fee of $_ shall apply, and the remaining balance may become immediately due and payable. This is usually used with the Acceleration Clause. Special reminder from California In California: Commercial contracts generally stipulate an annual interest rate of 10–18%
If the interest rate is not stated, you may only be able to claim the legal interest rate (usually 10%) Excessively high fees may be deemed as "excessive liquidated damages" and invalid. So don’t write an exaggerated number like 5% per month. 1%–1.5% per month is a common range. Professional full version (recommended to use directly) Late Payment: Any invoice not paid within 10 calendar days after its due date shall accrue interest at the quoted price of 1.5% per month (18% per annum), or the maximum quoted price permitted by applicable law, whichever is lower, calculated on the outstanding balance until paid in full. Contractor reserves the right to suspend services for non-payment. This way of writing: reasonable Executable Have the right to suspend Legally protected statement Mistakes to avoid No interest rate written No calculation method written down No grace period written Written too high (may be deleted by the court) Did not add “maximum permitted by law” Advanced writing (hard version) If you work in film and television or high-risk clients: Late payments shall constitute material breach of this contract. This gives you more legal leverage. core principles
Late fee clauses must do three things: reasonable clear Executable It's not intimidation. It's risk management.