Pactora Clause Guide
Payment Terms
Payment terms set out when invoices fall due, what happens if payment is late or disputed, and whether the supplier can suspend services over an unpaid bill.
This guide was written by Sneha Ganapavarapu, a qualified lawyer with experience in commercial contracts across technology, IP, and energy sectors. All legal sources are linked. This is general legal information, not legal advice. Always consult a qualified solicitor before signing any contract that matters to your business.
Plain English
What it is
Payment terms determine when you must pay, what interest accrues on overdue amounts, and what rights the supplier has if you do not pay on time. They also govern how disputed invoices are handled — whether you can withhold a portion without triggering late payment interest or service suspension.
In the UK, the Late Payment of Commercial Debts (Interest) Act 1998 implies a statutory right to interest on late B2B payments. Contract terms can vary this but cannot remove it entirely.
For UK freelancers & small businesses
What reasonable looks like
30-day payment terms from receipt of a valid invoice.
A clear dispute process allowing you to raise a query on part of an invoice without triggering interest on the whole amount.
Suspension rights limited to sustained non-payment after a cure period — not triggered by a single late or disputed invoice.
Interest at the statutory rate under the Late Payment Act, or a commercially agreed rate around 2% to 4% above base rate.
Late payment interest does not compound automatically or start accruing on the invoice date rather than the due date.
Watch out for
Red flags
Payment due within 7 or 14 days — insufficient time for most businesses to process invoices.
Suspension of services on any late or disputed invoice without a cure period.
High interest rates (above 8% per year above base rate) that make disputes commercially prohibitive.
Interest that starts from the invoice date rather than the due date.
Supplier can terminate for non-payment without a reasonable cure period.
Automatic offset rights allowing the supplier to deduct sums from money they owe you.
England & Wales
Market standard UK position
Payment within 30 days of a valid invoice.
Dispute process for contested invoices, with interest only on the undisputed portion.
Suspension only after a reasonable cure period (typically 14 to 30 days after the due date).
Interest at the statutory rate or 2% to 4% above base rate.
Termination for non-payment only after a cure period of at least 14 to 30 days.
Legal advice triggers
Ask your lawyer if…
Payment terms are fewer than 14 days.
Suspension rights apply to disputed as well as overdue invoices.
The contract can be terminated for a single late payment without notice.
Interest rates exceed 8% above base rate.
References
Legal sources
Late Payment of Commercial Debts (Interest) Act 1998 — implies statutory interest of 8% above the Bank of England base rate on B2B late payments. Contracts can vary the rate but cannot remove the right.
Late Payment of Commercial Debts Regulations 2013 — sets the minimum compensation entitlement for late payment.
Prompt Payment Code — voluntary code setting 30-day payment terms as a standard for larger businesses.
Read more
Further reading
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