Payment on non-business days: Overview, definition, and example
What is payment on non-business days?
Payment on non-business days refers to the situation in which a payment due under a contract or financial agreement falls on a day when the relevant financial institutions (such as banks) or businesses are closed for operations. Non-business days typically include weekends, public holidays, and other days when institutions are not conducting regular business activities. In such cases, many agreements provide a provision outlining how payments should be handled, typically specifying that the payment must be made on the next business day when institutions are open.
Why is payment on non-business days important?
Payment on non-business days is important because it helps avoid confusion and ensures that financial transactions are processed smoothly, even when they fall on days when banks or businesses are closed. By clearly addressing what should happen when a payment is due on a non-business day, agreements can help prevent delays, penalties, or disputes related to missed or late payments. This provision ensures that both parties understand when a payment is considered "timely" and can plan accordingly.
Understanding payment on non-business days through an example
For example, a company has a loan repayment due on Saturday, but since the bank is closed over the weekend, the contract specifies that the payment will be considered on time if made by the next business day, which is Monday. This provision ensures that the company does not incur a late fee or other penalties for a payment that falls on a non-business day.
In another example, an employee is due to receive a salary payment on a public holiday that falls on a Thursday. The employer's agreement specifies that if the payment due date falls on a non-business day, the employee will receive their salary on the next business day, which in this case would be Friday. This ensures that the employee is paid without delay, and the employer avoids any misunderstandings about the timing of payments.
An example of a payment on non-business days clause
Here’s how a payment on non-business days clause might appear in a contract:
“If any payment due under this Agreement falls on a non-business day, the payment shall be due on the next business day. For the purposes of this Agreement, a business day is defined as any day other than a Saturday, Sunday, or public holiday in [Jurisdiction].”
Conclusion
Payment on non-business days provisions are crucial for ensuring clarity and fairness in financial transactions. These provisions prevent issues when payment deadlines fall on weekends or public holidays and ensure that both parties know when payments are due and how they should be handled. This clarity helps avoid penalties, late fees, or disputes, making the payment process more efficient and predictable.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.