Our payment terms extractor scans the full contract text and identifies every financial obligation. This includes base fees and recurring payments, payment schedules and due dates, late payment fees and interest rates on overdue amounts, expense reimbursements and caps, deposits and retainers, refund and cancellation policies, clawback provisions, automatic price escalation clauses, and auto-renewal terms. Each item is flagged as Normal, Notable, or Risky based on how it compares to standard market terms.
Net 30 / Net 60 / Net 90
Payment is due within 30, 60, or 90 days of the invoice date. Net 30 is the most common B2B standard. Net 60+ can create cash flow problems for service providers.
2/10 Net 30
A 2% discount is available if paid within 10 days; otherwise full payment is due in 30 days. Common in manufacturing and wholesale.
Due on Receipt
Payment is due immediately upon receiving the invoice. Common in retail and one-time service agreements.
Milestone Payments
Payment tied to project milestones — e.g. 30% on signing, 40% at delivery, 30% on acceptance. Protects both parties in long projects.
Retainer
An upfront payment held against future work. Often non-refundable. Should specify when and how it is applied.
Late Payment Interest
Interest charged on overdue invoices, typically 1.5%–2% per month. At 2%/month, a $50,000 invoice accrues $1,000 per month in late fees.
Auto-Renewal
The contract (and its payments) automatically renew unless cancelled within a notice window. Commonly 30–90 days before renewal date.
Price Escalation
Allows the vendor to increase prices annually, often tied to CPI inflation. A 3–5% annual cap is standard; uncapped is risky.
These are the most common payment-related clauses that catch businesses and individuals off-guard:
Uncapped expense reimbursement
You agree to reimburse "reasonable expenses" with no maximum. A vendor can submit $50,000 in expenses and call them reasonable. Always require a cap and pre-approval for expenses over a threshold.
Non-refundable deposits with no delivery obligation
You pay a deposit, but the contract doesn't specify what happens if the vendor fails to deliver. You may have no right to the deposit back.
Automatic price increases
"Fees shall increase by CPI annually" sounds reasonable. But some contracts use uncapped percentage increases, compounding each year.
Auto-renewal with short cancellation window
A 12-month contract with a 90-day cancellation window means you must cancel by day 275 or you're locked in for another full year.
Interest on disputed invoices
Some contracts charge late fees even on invoices you are actively disputing. This is predatory — always include a dispute suspension clause.
Kill fee / early termination penalty
If you terminate early, you owe a percentage of the remaining contract value. A $200k/year contract with a 50% kill fee means $100k to exit mid-year.
Invoice acceptance period
"Invoices not disputed within 5 business days are deemed accepted." Miss the window once and you lose the right to dispute that invoice.
| Contract Type | Typical Payment Terms | Late Fee Standard | Red Flag |
|---|---|---|---|
| SaaS / Subscription | Monthly or annual, in advance | 1–1.5%/month | Auto-renewal < 30 days notice |
| Consulting / Services | Net 30, milestone, or retainer | 1.5–2%/month | Uncapped expense reimbursement |
| Employment | Bi-weekly or semi-monthly | Statutory (varies by state) | Clawback on signing bonus |
| Vendor / Supply | Net 30–60 | 1.5%/month | Price escalation > 5%/year |
| Commercial Lease | Monthly, due 1st | 5% or $100 flat fee | CAM charge true-up |
| Agency / Marketing | Net 30, monthly retainer | 2%/month | IP ownership tied to payment |
| Software Development | Milestone-based | 1.5%/month | Kill fee > 25% of contract |
No. This tool extracts and summarises payment-related clauses for informational purposes only. It does not constitute legal or financial advice. For contracts involving significant financial obligations, consult a qualified attorney before signing.
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