"Recently we received the final invoice for the installation of a radiator heating system. We didn’t think the work had been completed so we emailed the plumber and told him we’d pay once the work was finished. The plumber didn’t reply but has now sent another invoice with a late payment penalty added. We don’t have a written contract with the plumber, nor did we agree to specific payment terms or receive any terms of trade when we engaged him so we weren’t aware there was a penalty until we received his latest invoice. Can our plumber do this?"
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Your plumber is out of line. Companies can only charge a late payment or collection fee if they tell you about the fee before you enter into an agreement. In this case, your plumber hasn’t provided any notice of the late payment fees until after providing the services.
We suggest telling your plumber you dispute the invoice because the work hasn’t been completed (spelling out what he needs to do to complete the job) and that he has no basis for charging a late payment fee because he didn’t tell you about these charges in advance.
Generally speaking, contracts don’t have to be in writing, so it’s quite common for small businesses and sole traders to supply goods and services without providing any written agreement. Instead, these businesses often rely on verbal agreements, emails or basic written quotes.
However, if you’re entering into an agreement for something more substantial (such as a home heating system) you should ask for a written contract as it can save a lot of hassle if things go wrong. It ensures both parties understand what’s been agreed. Contracts for building work that costs $30,000 or more must be in writing.
Make sure you read any contracts before signing them. If you don’t understand the contract, ask the other party to explain the terms, or get independent advice.
The contract should cover delivery of the services, timing, ownership and risk in any goods, price, payment, failure to pay, liability, and how disputes will be handled.
If a service provider includes terms in its contract allowing it to recover late payment or debt collection fees, these costs must still be reasonable.
In addition to the rights and obligations set out in the written contract, there are also protections for consumers under the Consumer Guarantees Act (CGA) and Fair Trading Act (FTA).
Under the FTA, unfair terms are banned from standard form consumer contracts such as terms of trade. Examples of unfair terms include clauses that allow the supplier to unilaterally vary the contract, impose steep cancellation fees and increase the price without notice.
Under the CGA, providers guarantee their services will be performed with reasonable care and skill, fit for the particular purpose they were supplied, completed within a reasonable time and for a reasonable price if no price has been agreed. These guarantees apply regardless of any written contract.
If a trader doesn’t meet these guarantees, you can seek a remedy. Options include having the provider fix the problem, getting it fixed by someone else (if the provider doesn’t fix it) and claiming the costs from the provider, or cancelling the contract and claiming damages from the provider.
The Consumer Advice Line is available to all our members for support on any consumer-related issue. Our expert advisers can explain your rights and help you resolve problems with a retailer. Become a member now from just $12 and let us help you get a resolution.