Interest is not Interest … When it is a Penalty
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. Read more.