Entitlement of the trader to seek compensation for not paying the invoice by the counterparty within the time limit

Businesses participating on a daily basis have in their practice repeatedly faced a situation where the counterparty does not pay invoices within the time limit. What can we then do as a creditor? This study approximates the right of the entrepreneur (the creditor) to obtain the compensation referred to in the Law of 8 March 2013 to prevent excessive delays in commercial transactions (hereinafter ‘the Act’).

First, Whereas it should be pointed out that counterparties should conclude a civil law agreement in order to adequately protect their rights in writing, including the subject-matter of the contract, the time limit for its implementation, the way in which it is implemented, the amount, the way in which it is to be paid for the product or service; Notwithstanding the above, where the subject-matter of the contract has been executed and the counterparty does not wish to regulate the payment, the creditor shall be entitled to charge the compensation provided for in the Act.

The scope of the Act is defined in the content Article 2, which provides that:

The provisions of the Act shall apply to commercial transactions whose exclusive parties are:

• 1) entrepreneurs within the meaning of the provisions Act dated 6 March 2018 – Business law (Journal of Laws of 2023, item 221);
• 2) entities carrying out the activity in question under Article 6(1) Act dated 6 March 2018 – Business law;
• 3) entities in question under Article 4, Article 5(1) and Article 6 Act dated 11 September 2019 –  Public procurement law (Journal of Laws of 2022, items 1710, 1812, 1933, 2185; of 2023, item 412);
• 4) persons exercising a free profession;
• 5) branches and representations of foreign entrepreneurs;
• 6) (repealed);
• 7) entrepreneurs from the Member States of the European Union, the Member States of the European Free Trade Agreement (EFTA), parties to the Agreement on the European Economic Area or the Swiss Confederation.

According to another article of the Act (Article 3 The Act) shall not apply to:

1. debts subject to proceedings based on Act dated 28 February 2003 – Bankruptcy law (Journal of Laws of 2022, item 1520) and Act dated 15 May 2015 – Restructuring law (Journal of Laws of 2022, item 2309) as from the date of the bankruptcy or the date of the opening of the restructuring procedure, respectively;
2. contracts under which banking activities within the meaning of the provisions are carried out Article 5(1)(2) Act dated 29 August 1997 – Bank law (Journal of Laws of 2022, items 2324, 2339, 2640, 2707; of 2023, item 180);
3. contracts to which only public finance entities are parties within the meaning of public finance rules.

Legislator in Content Article 7(1) The Act indicates that in commercial transactions – except for transactions in which the debtor is a public entity, the creditor shall be entitled, without notice, to statutory interest for delay in commercial transactions for the period from the date on which the cash benefit is due until the date of payment (unless the parties have agreed on higher interest), if the following cumulative conditions are met:

• 1) the creditor has fulfilled his benefit;
• 2) the creditor has not received payment within the time limit specified in the contract.

The entrepreneur (the creditor) shall be entitled to receive compensation (compensation) without calling on the debtor to pay the following amount:

• 1) 40 EUR – where the value of the cash benefit does not exceed 5,000 PLN;
• 2) 70 EUR – where the value of the cash benefit is higher than 5,000 PLN, but lower than 50,000 PLN;
• 3) 100 EUR – where the value of the cash benefit is equal to or greater than 50,000 PLN.

Equivalent to the amount of compensation in question Under section 1, is determined by applying the average euro rate announced by the National Bank of Poland on the last working day of the month preceding the month in which the cash provision became due[1].

On the website of the National Bank of Poland you will find a table containing the euro rate per specific day[2]. When preparing a call for payment or a lawsuit for payment of an outstanding amount, the amount may be increased by the equivalent amount of compensation. It is important that compensation is payable on any invoice not paid on time.

Determination of compensation does not mean that the debtor will automatically pay the charge plus additional compensation. The procedural practice shows that sending a call for payment will not always have the intended effect, it may be necessary to initiate legal proceedings which may take several years.

However, court proceedings may be terminated after a few months, as the order for payment issued by the court will not be contested by the opposing party or the parties to the proceedings, in order to avoid a lengthy trial, they will decide to conclude a court settlement or an extrajudicial settlement.

Often, judicial proceedings speed up the decision-making process of those responsible for business matters and thus enable the disputed parties to reach mutual agreement (agreement).

However, in judicial practice long-term disputes prevail, which are the result of the complexity of the case, the position of the parties to the proceedings and the need to collect and analyse evidence.

Is the length of the delay in payment relevant to the court and therefore to the outcome of the case?

Thus, in some cases the length of the delay in payment is essential for the resolution of the case, as is pointed out in the case law and in the reference literature: ‘(...) in the case law, a small delay in payment is indicated as a condition for the creditor to refrain from judging the costs of recovery.

This direction of interpretation was indicated, among others, by SO in Koszalin in the judgment of 17 February 2015 (VI Ga 8/15, LEX No. 1833828). The judgment referred to concerned a delay of one day.

According to the deliberations of the District Court, a claim for compensation for recovery costs will not be taken into account if the debtor demonstrates that, in a particular case, it was not possible to undertake recovery operations and no costs were incurred.

In turn SO in Szczecin in a judgment with 28 July 2015 for a time of delay excluding, in the case in question, a claim for compensation 2 days (VIII Ga 75/15, LEX No. 1839947). Court of Appeal in Gdańsk in judgment of 29 June 2021 (I AGa 55/21, LEX No.

3343934) In contrast, it pointed out that the demand for compensation, where first – the legal predecessor of the creditor has not taken any steps to recover the claim and after second – where the debtor has settled obligations from individual invoices covered by the note only with a slight delay in payments, it should be treated as an abuse of the law within the meaning of Article 5 k.c.

The possibility of compensation should be limited by the circumstances of the case and the socio-economic purpose of the law.

Assured by the legislator to automate quota counting 40 EUR, even in the event of a slight delay in the payment of each individual invoice within the framework of the cooperation of the parties, despite the payment of individual claims from these invoices with a slight delay, it cannot constitute an additional regular collection of funds by the creditor as it distorts the function for which such compensation has been established’[3].

Each case must be treated individually, and therefore in some cases a slight delay of several days should not allow the creditor to charge compensation (compensation) on the basis of the Act. However, this depends on the circumstances of the case and the lost market practice in the economic sector in which the parties to the contract participate.

The legislator introduced on 1 January 2020 to the Polish legal order so-called relief from bad debts. This is a mechanism for correcting tax returns on invoices that have not been eventually paid. This solution works in income taxes (PIT and CIT) and in VAT. As a result, the taxpayer settles cash – paying taxes only on invoices for which the counterparties paid him. According to the information on the portal gov.pl in the accounts for 2021 of relief for bad debts benefited over 16,000 taxable persons[4].

Existing regulations allow creditors to obtain additional protection, but often require the entrepreneur to take additional organisational or legal action. Lawyers from our law firm are ready to support your business both in terms of legal and tax aid. Feel free to contact us.