Payments due on non-business days: Overview, definition, and example
What are payments due on non-business days?
Payments due on non-business days refer to contractual payment obligations that fall on a weekend or public holiday. Since banks and financial institutions are typically closed on these days, contracts often specify what happens when a payment is due on a non-business day—whether it should be paid early, delayed to the next business day, or follow a different arrangement.
For example, if a loan repayment is scheduled for January 1 (a public holiday), the contract might state that the payment is instead due on the next business day.
Why are payments due on non-business days important?
Clarifying what happens when a payment falls on a non-business day helps avoid confusion, late fees, or disputes between parties. Without a clear provision, one party might expect payment on the prior business day, while the other assumes it can be made on the next available banking day.
Financial agreements, leases, and commercial contracts often include a clause that specifies how to handle payments in these situations to ensure smooth transactions and compliance with banking practices.
Understanding payments due on non-business days through an example
Imagine a business takes out a loan with monthly payments due on the 15th of each month. In a given year, the 15th falls on a Sunday. If the contract states that payments move to the next business day, the borrower would make the payment on Monday, the 16th, without penalty.
In another example, a rental agreement requires rent payments on the first of each month. If the first falls on a public holiday, the contract might specify that payment is due on the previous business day, ensuring the landlord receives funds before banks close.
Example of a payments due on non-business days clause
Here’s how a payments due on non-business days clause might appear in a contract:
"If any payment due under this Agreement falls on a non-business day, such payment shall be made on the next succeeding business day, unless otherwise specified herein. No additional interest or penalties shall accrue as a result of such delay."
Conclusion
Payments due on non-business days ensure that financial obligations remain clear and predictable, preventing late fees, disputes, or payment processing issues. Addressing this scenario in contracts helps both parties manage payment expectations and align with banking schedules.
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.