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Late fees or late charges, does it matter?

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LeathrLdy

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What is the name of your state? California


"Late fees", so I am told, are legally described as "liquidated damages provisions", meaning that an arbitrary amount is chosen as the penalty for breaching a particular promise in the contract.

Does the term "late charge" have the same legal description?
 


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Senior Member
LeathrLdy said:
What is the name of your state? California


"Late fees", so I am told, are legally described as "liquidated damages provisions", meaning that an arbitrary amount is chosen as the penalty for breaching a particular promise in the contract.

Does the term "late charge" have the same legal description?

My response:

"Late charge" and "Late fee" are synonymous for "liquidated damages."

Late charges representing an unreasonable estimate of the damage resulting from late payment may constitute an unenforceable "liquidated damages" provision in the parties' contract. [Ca Civil § 1671(b)]
Liquidated damage provisions may also be included; even if unenforceable, they are likely to have an "in terrorem" effect.
Damages are "liquidated" when the debtor knows the amount owed or could compute this amount from reasonably available information. [Chesapeake Industries, Inc. v. Togova Enterprises, Inc. (1983) 149 Cal.App.3d 901, 907, 197 Cal.Rptr. 348, 352]
The amount fixed for liquidated damages "must represent a reasonable endeavor to estimate a fair compensation for the loss that may be sustained, and must bear some reasonable relation to such loss." [Howard v. Babcock, supra, 6 Cal.4th at 416, 25 Cal.Rptr.2d at 84]

IAAL
 

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