The Consent You Didn't Notice: Contractual Waivers of Late-Payment Rights in Supplier Onboarding

Most suppliers expect late-payment law to be a backstop. They assume that if an invoice goes overdue, statutory interest and compensation will apply. That assumption is understandable, but it is not safe. The first document a new customer sends often does more than collect bank details. It may ask the supplier to accept the customer's standard terms, and those terms can contain a waiver of statutory interest, fixed compensation and the right to charge recovery costs. The waiver is rarely labelled as such. It sits in an order form, a supplier registration portal, a schedule to a master services agreement or a hyperlink incorporated by a tick-box. By the time an invoice is overdue, the supplier may find that the right it thought was automatic has been signed away — or at least that the customer says so.

The document that does the damage

Supplier onboarding packs are administrative by design. They ask for company number, VAT registration, insurance certificates, bank details and a contact for invoices. They also often ask the supplier to confirm acceptance of the customer's purchase order terms or 'standard terms of business'. That confirmation can be a signature, a portal acceptance, an email reply or simply the act of supplying against a purchase order. The clause may read: 'The Supplier waives any right to interest, compensation or costs under the Late Payment of Commercial Debts (Interest) Act 1998.' Or it may be less direct: 'No interest shall accrue on any overdue amount.' Or 'The Supplier's sole remedy for late payment is payment of the invoice amount.' A clause that bars set-off can also make it harder to recover interest by withholding supply or adjusting invoices.

Why the waiver matters

Under the 1998 Act, a supplier that is not paid on time can generally claim statutory interest and fixed compensation. The interest rate is set by reference to the Bank of England base rate, and the compensation is a fixed sum depending on the size of the debt. Those rights are not a complete answer to late payment, but they are a useful lever. They put a price on delay and give a supplier something to negotiate with before instructing solicitors. A waiver removes that lever. It does not stop the supplier from chasing the principal debt, but it can make chasing slower and more expensive. In a dispute over a £20,000 invoice, the difference between having and not having a statutory interest claim can be the difference between a viable recovery and a commercial write-off.

The legal position is not a simple switch

A clause that purports to waive statutory rights is not automatically effective because it appears in a document. The customer must show that the clause was incorporated into the contract, that it was clear enough to cover the right in question, and that it was not undermined by a conflicting term. The 1998 Act itself contains provisions about contracting out, and a court may scrutinise whether a standard term is fair and reasonable in the circumstances. But suppliers should not treat that as a safety net. Business-to-business contract law is not a general fairness regime. The Unfair Contract Terms Act 1977 can catch some exclusion clauses in standard terms, but it does not make every harsh payment term unenforceable. Litigation over a waiver clause is expensive, slow and uncertain. The practical answer is to deal with the clause before the first invoice, not after the third reminder.

Where to look before you sign

Read the customer's standard terms as a payment document, not as background. Search for 'interest', 'compensation', 'recovery costs', 'set-off', 'waiver', 'sole remedy' and 'entire agreement'. Check schedules and annexes as well as the main terms. If the onboarding pack incorporates terms by hyperlink, download the linked version and keep a dated copy. If a portal requires a tick-box, take a screenshot of the wording on screen. If a purchase order says 'by supplying against this order the supplier accepts these terms', ask for the terms in full before accepting the order. The clause may be in a payment terms schedule, a supplier code of conduct, or a 'continuous improvement' appendix. It is rarely in the section headed 'late payment'.

The clauses that hide in plain sight

The most common formulation is a direct waiver of the 1998 Act. A second is a 'no interest' clause that says overdue amounts do not bear interest. A third is a 'sole remedy' clause that limits the supplier to the invoice amount. A fourth is a 'set-off' clause that allows the customer to deduct disputed sums, credits or alleged losses before paying. A fifth is an 'entire agreement' clause that tries to prevent the supplier relying on pre-contract assurances about payment dates. None of these clauses is necessarily fatal on its own, but together they can strip out the commercial pressure that statutory interest provides. The supplier may still have a claim for the debt, but the cost and delay of pursuing it rise.

What to negotiate back in

The aim is not to draft a hostile contract. It is to make the payment terms match the supplier's cash-flow risk. A short, clear clause is usually enough: 'Nothing in these terms excludes or limits the Supplier's right to statutory interest, fixed compensation and reasonable recovery costs under the Late Payment of Commercial Debts (Interest) Act 1998. Any provision to the contrary is of no effect.' If the customer will not accept that, try a narrower version: 'Interest shall accrue on overdue sums in accordance with the Late Payment of Commercial Debts (Interest) Act 1998. The Customer may not set off disputed amounts without the Supplier's written agreement.' Ask for the waiver to be deleted and initialled. If the customer's system cannot accommodate a change, ask for a signed side letter or a purchase order acknowledgement confirming that the supplier's terms prevail on payment. Record the agreement in an email and keep it with the contract.

Before the first invoice

Do not wait until an invoice is overdue to discover what was signed. Add the customer's payment terms to the credit-check file alongside the payment practices report and the trade references. Note the interest position, the set-off position and the notice requirements. If the customer insists on a waiver, price it. A supplier that gives up statutory interest is giving the customer an option to pay late at no statutory cost. That option has value, and it should be reflected in the quote, the deposit, the stage payments or the decision not to extend credit at all. The waiver clause is not just a legal technicality. It is a cash-flow term, and it deserves the same attention as the payment date itself.