A well-written late payment clause is the cheapest insurance a freelancer can buy. It tells the client in advance when payment is due, what happens if it is late and how much interest or compensation applies, and it gives you a legal basis if you ever need to chase an overdue invoice.
The short answer: include a due date or number of days, an interest rate for delayed payment, optionally a fixed recovery fee, a right to pause work, the governing law and the way to resolve disputes. Between businesses in the EU, late-payment rules provide default protections, and Spanish law sets default interest and a fixed compensation. For clients outside the EU, the contract is even more important.
This guide is general information, not legal advice, and the sample wording is not a substitute for a lawyer. Late-payment rules differ by country and by contract type. Have a lawyer review your standard contract once, especially for high-value or long-term clients.
Key takeaways: late payment clause
- A clear late payment clause states the due date, interest, any fixed fee and the consequences of non-payment.
- Between businesses, EU and Spanish rules give default interest and compensation, but the contract can set clear terms.
- Add a right to suspend work and to keep rights over deliverables until payment.
- Choose a governing law and a dispute method that you can realistically use.
- Keep the clause simple and professional; clients accept it more easily.
In this guide
- Key takeaways: late payment clause
- What is a late payment clause?
- What the law says about a late payment clause
- What to include in a late payment clause
- Sample late payment clause
- Contract terms by type of client
- How to get a client to accept a late payment clause
- Using the clause when payment is late
- Common mistakes to avoid
- Frequently asked questions about late payment clause
- Final thoughts on late payment clause
- Sources and further reading
- Related guides
What is a late payment clause?
A late payment clause is a part of your contract or terms of service that sets what happens when the client does not pay on time. It usually covers the payment deadline, interest on overdue amounts, an optional fixed fee to cover recovery costs, and the steps you may take, such as pausing work.
Without one, you depend on the default legal rules and on your relationship with the client. With one, the conversation about an overdue invoice is shorter and easier. For the invoice itself, see how to invoice a foreign company as a freelancer in Spain.
What the law says about a late payment clause
Within the EU, a directive on combating late payment in commercial transactions sets default rules between businesses. Spain implements it in Law 3/2004. As general points, which you should verify against the current text:
- Where the contract does not set a deadline, the default payment period is 30 days from receipt of the invoice or the goods or services.
- Contracts can set a longer period, but the law limits it, commonly to 60 days, and rules out terms that are grossly unfair to the creditor.
- Late-payment interest runs automatically in many cases, at a statutory rate linked to the European Central Bank’s rate plus a margin of several percentage points.
- The creditor can claim a fixed compensation for recovery costs, set at EUR 40 in the directive, plus proven additional costs.
These default rules are strongest between businesses within the EU. If your client is in another country, or if the contract is governed by another law, the default rules may not apply as you expect. That is why a clear clause matters.
What to include in a late payment clause
| Element | What to write |
|---|---|
| Payment deadline | Invoices are payable within a fixed number of days, for example 15 or 30 |
| Late interest | A clear rate, for example a fixed annual percentage or the statutory rate, on overdue amounts |
| Fixed recovery fee | A stated amount for collection costs, if allowed by the governing law |
| Suspension of work | The right to pause the services until payment |
| Ownership of deliverables | Rights are transferred only after full payment |
| Currency and bank charges | The currency of payment and who bears bank and conversion costs |
| Governing law and disputes | Which law applies and where or how disputes are resolved |
| Notice | How reminders and notices are sent |
Sample late payment clause
This is a simple example in plain English. Adapt it to your situation and ask a lawyer to review it.
Payment and late payment. Invoices are payable within 30 days of the invoice date. If an invoice is not paid by its due date, the Client shall pay late-payment interest on the overdue amount at the rate provided by applicable law, or, if none applies, at [X]% per year, from the due date until the date of full payment. The Client shall also pay a fixed amount of EUR 40 for recovery costs, without prejudice to the right to claim proven additional costs where the law allows it. The Provider may suspend the services and withhold delivery of the work until all overdue amounts are paid. Ownership of the deliverables passes to the Client only after full payment. All bank and transfer charges are paid by the Client.
Adjust the interest rate and the fixed fee to what the governing law allows and what you are comfortable to enforce.
Contract terms by type of client
| Client | Approach |
|---|---|
| Spanish business | Rely on Law 3/2004 and repeat the key terms in the contract |
| Business in another EU country | The directive gives similar default rules, but the contract should name the governing law and set clear terms |
| US business | Use clear contract terms, a deposit and milestone payments; statutory protection is different |
| Marketplace or platform | Terms are set by the platform; protect yourself with escrow and milestones |
For a US client, also read how to invoice a US client from Spain.
How to get a client to accept a late payment clause
- Keep it short and neutral. A reasonable clause looks like a standard business term.
- Explain it as policy: «These are my standard terms for all clients.»
- Offer a trade-off: for example, a discount for payment in 7 days.
- Use deposits and milestones to reduce risk before any late payment can happen.
- Do not hide it. Mention it in the proposal, the contract and the invoice footer.
Using the clause when payment is late
Having the clause is the first half; using it is the second. When an invoice is late, send a reminder, then a formal notice that quotes the clause and the interest accrued, and decide whether to pause work. The full sequence is in how to collect an unpaid invoice from a foreign client. Add the due date and a short reference to your terms on every invoice using our freelance invoice template in English.
Common mistakes to avoid
- Not having any written payment terms.
- Setting an interest rate or fee that the governing law may not allow.
- Choosing a governing law or court that you cannot realistically use.
- Putting the clause only in the contract and not on the invoice.
- Not saying who pays bank charges.
- Failing to enforce the clause, which teaches clients that deadlines are optional.
Frequently asked questions about late payment clause
What is a late payment clause?
It is a contract term that sets the payment deadline and the consequences of late payment, such as interest, a fixed fee and the right to pause work.
Is late payment interest automatic in Spain?
Between businesses, Spanish law provides default late-payment interest and a fixed compensation. A clear clause in the contract makes the terms easier to apply. Check the current rules.
What payment period is allowed?
If no deadline is agreed, the default is generally 30 days. Contracts may extend it, but the law limits it, commonly to 60 days.
Does the clause work with clients outside the EU?
The EU rules do not apply by themselves, so your contract, its governing law and your payment security matter more. Use deposits and milestones.
Can I stop work if the client pays late?
If your contract says so, yes. State the right to suspend work in the clause and give written notice before you do it.
Should I use a lawyer?
A single review of your standard contract is a good investment, especially for high-value or long-term clients.
Final thoughts on late payment clause
A late payment clause costs nothing to include and saves a lot of stress later. Set a clear deadline, state the interest and fixed fee that the governing law allows, reserve the right to pause work and repeat the terms on every invoice. Add deposits for new clients, and your late payment clause will do most of its work before any invoice is ever late.
Sources and further reading
- Directive 2011/7/EU on combating late payment (EUR-Lex)
- Boletín Oficial del Estado (BOE): Ley 3/2004 on late payment
- European e-Justice Portal
Related guides
- Unpaid Invoice from a Foreign Client: How to Collect Step by Step
- How to Invoice a Foreign Company as a Freelancer in Spain
- How to Invoice a US Client from Spain: VAT, Currency and What to Include
- Freelance Invoice Template in English (Free Download for International Clients)
Disclaimer: This article is for general information only and is not tax, legal or financial advice. Rules, fees and thresholds change often and differ by country; always confirm current details with the tax authority and a qualified adviser. Some links may be affiliate links, which means we may earn a commission at no extra cost to you.