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ARTICLE · 05 SEPTEMBER 2013

The Second Opinion: Interest Is Not Interest … When It Is A Penalty

McCarthy Tétrault
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In a recent case, a construction contract specified a late payment interest rate of 24% per annum and a legal/collection fees charge of 20% on the amount due.

CanadaLitigation, Mediation & Arbitration
Martin Boodman
Martin Boodman
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In Diamantopoulos v. Construction Dompat Inc., 2013 QCCA 929, a construction contract specified a late payment interest rate of 24% per annum and a legal/collection fees charge of  20% on the amount due. The Québec Court of Appeal characterized these clauses jointly as "penal", excessive and abusive, and reduced the charges to a single, global interest rate of 15%. The court exercised its discretion under article 1623 C.C.Q. which permits judicial reduction if the amount in a penalty or liquidated damages clause is abusive. It is noteworthy that the contract in issue was expressly held not to be a consumer contract or adhesion contract which would have given the court other revision powers.

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