How much interest can I agree upon with my Spanish buyer for late payments?

The commercial and late payment interests accrued by a pending invoice is determined by law and is discussed in the body of the main contract itself. For instance, if you sell your good/serve to a Spanish client, and if you have chosen for your sales to be ruled by Spanish law, then the applicable interests will be applied as stated by the Spanish law.

Provided that the Spanish law is applicable, you have the following options:

• Agree on a specific interest rate in your order or contract. But of course, not all agreements stand. They must respect the general principles of proportion and adhere to the “police-law” or public order. And so is the agreement on applicable interests as a reference, 1 to 1,5% monthly is quite used. There is no specific limit set by law, but it does state that the agreed interest cannot be overly higher than normal or be disproportionate, depending on each particular case. In case of a dispute this particular issue would have to be examined on a case by case basis.

• If you have not agreed anything on this issue, then the Spanish late payment law applies, so the applicable interests would be those of the European Central Bank increased in 8%.

It is interesting to highlight that in Business to Business sales, the Spanish law states there is no need to explicitly agree on late payments generating interest in favour of the creditor or for the creditor to summon a debtor for a payment. Late payment interests accumulate automatically from the due date of the invoice.

Should the sale or contract end up in a commercial dispute, then be aware that the Spanish practice and of course the law, allows the creditor to claim late payment interests. This applies to both amicable and judicial collections. During the amicable collection, the debtor will most likely try to avoid the payment, based on alleged lack of conformity of the goods or services. It is therefore convenient to have a well-documented file proving that the you complied as seller or service provider. Counting on the support of specialised commercial litigation lawyers is also an asset when dealing with these situations.