Can a non-profit be charged a late fee due to a breach of contract?

We have a signed contract for services we provided to a non-profit organization. Per our contact, the balance is due on the date of an event. If balance is not received, a 10% late fee accrues each day payment is late. The non-profit has not paid the balance and is saying that the 10% late fee is not enforceable in the state? Is this true?

Asked on November 26, 2013 under Business Law, California


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 7 years ago | Contributor

No, non-profits can be charged a late fee, if they agreed to pay one. However, the late fee you describe is not enforceable: a 10% fee per day is 300% per month, which is usury--indeed, it may even meet the definition of criminal usury. A reasonable late fee, agreed to in  a written contract, is enforceable.

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