Is it legal for me to charge $150 per day if the owner has not paid me within 2 days after the job has been completed?

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Is it legal for me to charge $150 per day if the owner has not paid me within 2 days after the job has been completed?

The contract states the following, “The above specifications, terms and conditions of this proposal are satisfactory and are hereby accepted. You are authorized to do the work as set forth herein. Payment will be made as stated above after work has been finished. If payment is not made within two days after the work has been finished you will be charged $150 per day until payment stated above has been received. This is to acknowledge that I have read the terms and conditions of this page as well as the second page titled Terms and Conditions to the Proposal and that I understand and agree”.

Asked on June 28, 2012 under Business Law, New Mexico

Answers:

Cameron Norris, Esq. / Law Office of Gary W. Norris

Answered 9 years ago | Contributor

The $150 provision is something called a liquidated damages clause.  They are somewhat problematic for a couple of reasons.  Contract law does not allow for true penalties.  A liquidated damages clause is only valid of two requirements are met: (1) the damages are hard to calculate for some reason, (2) the damages were a reasonable prediction of the harm to you at the time the contract was made.  In addition, an unreasonably low liquidated damages clause is sometimes challenged as being optional or non-exclusive.  An unreasonably high liquidated damages clause is sometimes challeneged as being a penalty and invalidated as such.  In this case you could claim it is hard to put a price on the value of having the job done (I would buy that argument) and that $150 for having the job done was a reasonable estimation of damages for some reason or another. 

The provision is probably valid and would be upheld depending on the value of the work.  If the provision meets the two part test above, then it is enforcebale after one day or after 100 days.


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