The EU Directive 2011/7/EU (amended by Directive 2015/2366) sets maximum payment terms for construction contracts and services. Contractors and suppliers must be paid within 30 days of invoice (or longer only if both parties expressly agree). If a customer delays payment beyond the agreed term, late payment interest accrues automatically at a statutory rate (typically 6% plus the European Central Bank rate). However, many construction contracts in EU jurisdictions attempt to circumvent this protection by including long payment terms (60, 90, or 180 days), hidden fees for late payment, or provisions that allow customers to refuse payment without reason. Before signing a construction contract, you need to ensure payment terms comply with the directive and understand your rights to claim late payment interest if you're not paid on time.
What is a Payment terms and prompt payment enforcement?
EU Directive 2011/7/EU (Late Payment in Commercial Transactions) requires payment for construction services and goods within 30 days unless parties agree in writing to a longer term (up to 60 days in exceptional cases). Late payment interest accrues automatically at a rate set by the directive (base rate plus interest spread). The directive applies to all B2B transactions within the EU.
Red flags to watch for
The directive caps standard terms at 30 days. If your contract states 60-90 days payment without being a written exception (signed by both parties), it violates the directive and may be unenforceable.
Late payment interest is automatic under the directive; you cannot contract out of it. If the contract makes it optional or requires the contractor to claim it separately, it violates the directive.
If the contract is silent on late payment interest, the statutory rate applies automatically (usually base rate of ECB + 8%). The absence of a clause doesn't waive the directive's protection.
If the customer can unilaterally withhold payment pending minor defects without a defined dispute process, this circumvents the prompt payment requirement.
Some contracts state 'we pay you when our client pays us', effectively extending payment timelines indefinitely. This may violate the directive unless explicitly allowed in the contract.
If the contractor can suspend but the customer continues to delay, the contractor is locked in. The contract should allow termination if payment is substantially overdue.
Your legal rights
EU Directive 2011/7/EU (amended by Directive 2015/2366) sets a mandatory 30-day payment term for B2B transactions unless parties agree in writing to a longer term (maximum 60 days in exceptional cases). Late payment interest accrues automatically at the rate set by each member state (typically ECB base rate + 8%). The directive is enforceable in all EU member states, and national courts can order late payment interest and damages. Contractors can also claim recovery costs for dunning (reminder) letters.
Questions to ask before you sign
- 1What is the agreed payment term, and is it within 30 days of invoice as per the Late Payment Directive?
- 2If payment is late, what is the late payment interest rate, and does it accrue automatically?
- 3What defines 'completion' of work, and does payment depend on the customer's satisfaction assessment?
- 4Can the customer withhold payment pending defects, and if so, what is the dispute resolution process?
- 5If I suspend work due to non-payment, at what point can I terminate the contract?
- 6Will you reimburse recovery costs if I incur expenses pursuing late payment (dunning letters, court costs)?
- 7If your client (the customer's client) doesn't pay you, do I wait indefinitely for payment, or can I invoice you regardless?
Disclaimer: This guide is for educational purposes only and does not constitute legal advice. Contract law varies by jurisdiction and individual circumstances. Always consult a qualified legal professional before making decisions based on this information.