Default Interest Loan Agreement

It would appear that the above attitude with respect to the late payment interest rate provisions now applies to all contractual terms when they are analyzed to determine whether they are punishable or not, and courts are reluctant to remove a certain amount as a penalty simply because the amount declared is greater than the actual loss. If you need help understanding the late payment interest clause, you can publish your legal needs on the UpCounsel marketplace. UpCounsel only accepts the top 5 percent of lawyers on its site. Lawyers on UpCounsel come from law schools like Harvard Law and Yale Law and average 14 years of legal experience, including working with or on behalf of companies like Google, Menlo Ventures and Airbnb. It is important that the lender sets the default rate as fair and appropriate to ensure that the provision is enforceable and is not defined by a penalty interest rate or is not considered established. Most courts will determine whether the contractual clause is punishable or whether the clause is enforceable by examining whether a genuine attempt has been made to assess the actual harm that could occur in the event of a breach of its obligations. In Arab Bank Australia v. Sayde Developments Pty Ltd [2016], NSWCA 328 found that a 2% delay rate was not a penalty under a facility agreement. The court stated that the amount claimed as default interest was justified as a true expectation of loss. The costs taken into account were real and foreseeable at the time of the conclusion of the contract.

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