Late payment in commercial transactions: your rights when a customer fails to pay on time
For many businesses and self-employed people, late payments are one of the main cash flow problems. The good news is that the law provides specific tools to tackle late payments in commercial transactions, and understanding them thoroughly is the first step towards enforcing them.
What the law says
Law 3/2004 on combating late payment in commercial transactions applies to payments between businesses and professionals (B2B transactions) and between businesses and the public sector. Its aim is to prevent excessive payment terms from being used to finance oneself at the creditor’s expense.
Its most significant consequence is clear-cut: when the debtor fails to pay within the statutory or agreed time limit, they are automatically in default. No prior demand, notice of due date or formal claim is required for the right to late payment interest to arise.
What the creditor can claim
- Late payment interest: this applies automatically. The statutory rate for commercial transactions is published every six months and has reached high levels, well above most financial products, which strengthens the creditor’s position.
- Compensation for collection costs: the debtor must pay the duly substantiated collection costs, which must be reasonable and proportionate to the amount of the debt.
- Retention of title: if expressly agreed prior to delivery, this allows the seller to retain ownership of the goods until full payment of the price, thereby strengthening their security against non-payment.
A clear trend: shorter payment terms
European and Spanish case law has been strengthening creditor protection. The courts have confirmed the primacy of the 30-day payment term in certain transactions, and at European level there is a debate about reducing the maximum payment term across the board. The scope for imposing long payment terms on suppliers is narrowing.
How to proceed in practice
Although interest accrues automatically, enforcing it requires a methodical approach. An effective sequence is usually: first, a formal notice to the debtor setting out the accrued interest; then, if there is no response, a certified demand (e.g. by registered fax); and, if non-payment persists, the initiation of legal proceedings to recover the debt.
Thoroughly documenting the commercial relationship (accepted quotations, invoices, correspondence) is crucial for the claim to be resolved swiftly.
How can we help you?
At SF Abogados, we support businesses and self-employed individuals in preventing and managing these situations. If you need advice on this matter, our team is at your disposal.
www.sfabogados.com
