If any aspect of your business involves the extension of credit, you are taking a risk. Incorporating certain terms in your contracts can cover some of the costs of those risks. Whether you are leasing real estate to tenants, selling materials or renting equipment on credit, or loaning money, it is probably a good idea to consider including provisions for late fees, finance charges, and attorneys’ fees in your contracts.
One of the most common questions I get from clients involved in a dispute is whether they can recover attorneys’ fees. North Carolina law allows for attorneys’ fees to be awarded to the prevailing party in a lawsuit if a signed contract provides for them. However, the award of attorneys’ fees in a contract dispute cannot exceed 15% of the principal amount of the debt. This can pose a problem in disputes involving small amounts of money, as the legal costs may far exceed any possible recovery.
Similarly, North Carolina law allows interest on past due balances if a signed contract provides for it as long as the interest rate does not exceed the maximum allowable rate. For extensions of credit on open accounts, the highest rate allowed in North Carolina is 18% per annum. Once a judgment is entered, interest will accrue at the rate of 8% per annum, unless the contract provides for the contract rate to continue post-judgment.
Other fees and costs may be recoverable depending on the terms of the contract and the particulars of the goods or services being provided. It is always prudent to have your contracts reviewed to make sure the terms comply with the law and enable the maximum recovery upon default.
Please feel free to contact Vann Attorneys, PLLC for further information and with any questions.