Does the Late Payment of Commercial Debts (Interest) Act 1998 apply to the recovery by the customer of a part-payment made in advance to the supplier under a supply of goods and services contract where there has been a subsequent failure to supply by the supplier? Would that part-payment, where there has been no corresponding performance, be a ‘qualifying debt’ for the purposes of LPCD(I)A 1998?

This Q&A assumes that the question relates to a commercial, business-to-business agreement which makes no reference to interest on late payments or to the refund of payments.

With some exceptions, the Late Payment of Commercial Debts (Interest) Act 1998 (LPCD(I)A 1998) applies to contracts for the supply of goods or services where the purchaser and the supplier are each acting in the course of business.

A term is implied into contracts which fall under LPCD(I)A 1998 that any qualifying debt shall carry simple interest (LPCD(I)A 1998, s 1).

Generally speaking, again, with some exceptions, 'purchaser' means, the buyer in a contract of sale or the person who contracts with the supplier in any other contract