Is interest owed on sum agreed?

[AMSC]

We have finally reached a settlement with a builder for breach of contract avoiding the need to go to the Small Claims Court for £3500. The builder has now said that he will pay it in monthly instalments of £210 so it will take 17 months to pay it off. If this went to the Small Claims Court would the court order the builder to pay interest on the £3500 in which case I will ask for it or would the builder simply have to pay off the £3500 over the 17 months? If the court did order interest to be paid would this be the court interest rate of 8% please? Thank you.

[atticus]

When reaching agreement on a sum to be paid, you should also agree when and how that sum is to be paid. You could say that the agreed sum was £3,500 with no mention of instalments, and so you would expect to receive payment in full within 14 days but will accept 28 days in this case.

Interest is not payable on judgement debts for less than £5,000.

[R0b]

Just to add to the above, whilst statutory interest is not available for less than £5k, you can agree as part of your settlement terms that interest will will accrue daily in the event there is a default on payment which will be at the agreed rate per annum up until the date the overdue balance including the accrued interest is paid whether before or after judgment.

Ideally, you should record the agreed settlement terms in writing and have it signed and dated by you and the builder so both of you are clear on what was agreed and you can use that as evidence if you have to go to court.

Once you have the settlement in writing, if the builder ends up failing to make the agreed payment(s) on time, then you can issue proceedings and make an application for summary judgment (comes at an additional cost of £275 but is recoverable) as the settlement amount will be considered a debt. All you would need to prove is that the debt was owed and the builder failed to pay on time, which shouldn't be too difficult since you would have a written settlement agreement.

You would then avoid the need to go through protracted proceedings and wait potentially 12 months or longer to have your day in court. That may also take you over the £5,000 threshold for statutory post-judgment interest (assuming you didn't agree any contractual interest).

[AMSC]

Many thanks for this. The problem is that the £3500 (with no mention of instalments) was an offer that we rejected and, following more correspondence, we asked them if they were still willing to settle at £3500 simply because it would bring closure and avoid going to court. They replied that they would revive the offer but that it would have to be by instalments. I appreciate now that we can't ask for interest but 17 months feels a long time given the builder's history when I am without the full amount so unsure where to go with this.

[atticus]

It seems that you do not have an agreement, so your choice is to agree those terms, try to get a better deal, or go to court.

[AMSC]

Understood - thank you for the advice and your prompt responses.

[atticus]

Just to be clear, as a matter of law, if you turn down an offer, it is no longer available for you to accept unless the person who made the offer puts it back on the table.

In your case, you could say you will accept £3,500 if paid in full by [specified date], otherwise court it is.