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socrateaser
socrateaser, Attorney
Category: Business Law
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Experience:  Retired (mostly)
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What are the maximum late fee i can apply business in Ohio?

Customer Question

Customer: What are the maximum late fee i can apply for my business in Ohio?
JA: Thanks. Can you give me any more details about your issue?
Customer: I have a company that has a late on a invoice and received a email stating they will pay half this month and half next month. Terms was 15 day.
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Submitted: 12 months ago.
Category: Business Law
Expert:  socrateaser replied 12 months ago.

The rule in Ohio concerning late charges is somewhat ambiguous: "Where the parties have agreed on the amount of damages, ascertained by estimation and adjustment, and have expressed this agreement in clear and unambiguous terms, the amount so fixed should be treated as liquidated damages and not as a penalty, if the damages would be (1) uncertain as to amount and difficult of proof, and if (2) the contract as a whole is not so manifestly unconscionable, unreasonable, and disproportionate in amount as to justify the conclusion that it does not express the true intention of the parties, and if (3) the contract is consistent with the conclusion that it was the intention of the parties that damages in the amount stated should follow the breach thereof." Lake Ridge Academy v. Carney,*****3d 376, 381 (1993).

Although, the above-state rule does not use the term "late charge" or "late fee," the Lake Ridge case rule has been repeatedly used by trial courts to determine whether or not a late charge is enforceable. In plain English, a late charge that has no relationship to the actual damages caused to the party imposing the late charge will not be enforced by a court. Example:

If it is reasonably likely that it would cost you $50 in administrative costs to deal with a late payment, then that is the maximum late charge that may be imposed. However, if it is reasonably likely that due to a late payment, that your own payments will be materially impaired, and the chain of events would almost certainly cost you $1,000, then that is the maximum late charge.

The trick is to prove the reasonably likely damages.

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