10.9 Late Fees

There is no statutory prohibition on excessive late fees. However, advocates can argue that late fees are equivalent to stipulated damages for delayed performance.1  A stipulated damages clause is given effect if the court deems it to be a true approximation of actual damages.2  A court may modify stipulated damages if it finds the damages are manifestly unreasonable contrary to public policy.3  Unreasonably large stipulated damages that, as a result, are penal in nature, violate public policy.4

• 1La. C.C. art. 2005 (parties may stipulate to damages for delayed performance).
• 2La. C.C. art. 2005 cmt. c.
• 3La. C.C. art. 2012; Lombardo v. Deshotel, 94-1172, p. 8 (La. 11/30/94), 647 So.2d 1086, 1091 (citing La. C.C. art. 2012 in dicta with legislative history); Carney v. Boles, 25,905, p. 7 (La. App. 2 Cir. 9/21/94), 643 So. 2d 339, 343. (“When stipulated damages in a contract do not bear any reasonable relation to the actual damages suffered, courts have reduced the amount of damages recoverable.”).
• 4See, e.g., Keiser v. Catholic Diocese of Shreveport, Inc., 38797 (La. App. 2 Cir. 08/18/04), 880 So.2d 230 (stipulated damages “should reasonably approximate the obligee’s loss in the event of a breach and should not be penal. To determine the reasonableness, the court should inquire as to whether the parties attempted to approximate the actual damages in confecting the agreement.” (internal citations omitted)); Mobley v. Mobley, 37364, p. 7 (La. App. 2 Cir. 08/20/03), 852 So.2d 1136, 1140 (concluding that a party should be able to put on evidence regarding actual damages to show that stipulated damages were unreasonably excessive); James Constr. Grp., L.L.C. v. State, 2007-0225, p. 13 (La. App. 1 Cir. 11/02/07), 977 So.2d 989, 998 (stipulated damages of $10,000 per day for late performance of a construction project was reasonable because it was equal to the average daily cost of interference and inconvenience to the road user); Plaquemines Par. Gov't v. River/Road Constr., Inc., 2001-2222 (La. App. 4 Cir. 08/28/02), 828 So.2d 16, 28 (finding that the trial court erred by failing “to consider the reasonableness of the amount in the stipulation, as possibly being contrary to public policy”).