California late fee law

10%per year

Triggered by the default itself, typically once payment is overdue by a set number of days. Often sector-specific, so check the scope covers your work.

For breach of contract - the situation covering overdue B2B invoices - Civ. Code § 3289(b) provides that if a contract entered into after Jan. 1, 1986 does not stipulate a rate, the obligation bears interest at 10% per annum after breach (excludes notes secured by real-property deeds of trust); a contractually stipulated lawful rate keeps running after breach (§ 3289(a)). Separately, the constitutional default "legal rate" for loans/forbearances generally is 7% per annum (art. XV, § 1). Both verified on the official leginfo.legislature.ca.gov site.

Yes, subject to the constitutional usury limits of art. XV, § 1: for loans/forbearances NOT primarily for personal, family, or household purposes (i.e., business/commercial), the cap is the higher of 10% per annum or 5% over the Federal Reserve Bank of San Francisco discount rate (set as of the 25th day before the loan); consumer-purpose loans are capped at 10%. Exemptions swallow much of the rule: banks, savings associations, credit unions, industrial loan companies, licensed pawnbrokers, real-estate-broker-arranged loans secured by realty, and other statutorily exempt classes are not subject to the caps. Note usury law applies to loans/forbearances - bona fide trade credit and agreed charges on sales invoices are generally analyzed as forbearance only if credit is extended on an overdue debt.

public+private-construction

Public: California Prompt Payment Act (Gov. Code § 927 et seq.) - state agencies must pay undisputed invoices within 45 days of receipt or pay late-payment penalties (must dispute within 15 working days; enhanced penalties for small businesses). Private construction: Civ. Code § 8800 - owner must pay undisputed progress payments within 30 days of demand; violation carries a penalty of 2% per month on the amount wrongfully withheld in lieu of interest, plus prevailing-party attorney fees; owner may withhold up to 150% of a good-faith disputed amount. Related contractor-to-subcontractor prompt-pay provisions exist across the construction codes. No general private non-construction commercial prompt-pay act.

Flat late fees on commercial invoices are enforceable if they satisfy California's liquidated-damages doctrine (reasonable, not a penalty; California law presumptively favors liquidated-damages clauses in non-consumer contracts). In construction, the 2%/month prompt-payment penalty regime supplies the remedy for wrongful withholding. Interest-style late charges on trade credit can implicate usury as a "forbearance" if the transaction is recharacterized as a loan - the business-purpose cap (higher of 10% or FRBSF discount +5%) is the relevant ceiling for non-exempt creditors.