The contract provides for penalty interest where the buyer is in default on settlement, and interest runs without the need for a demand. Default arises if settlement has not occurred by the stipulated time, commonly late afternoon, on the appointed day.
Interest is counted by treating the day the buyer should have settled as the first day and not counting the day settlement actually occurs if it is within the stipulated time, because the buyer is not in default on that day. All days between the appointed date and actual settlement are counted, including weekends and public holidays. The usual rule that an action due on a weekend or holiday rolls to the next business day does not rescue a defaulting buyer, because the relevant date was the original settlement date, not the delayed date caused by the default.
Where the delay is the vendor's fault, the buyer generally suffers no loss on rates because the liability to pay is postponed. Where the buyer causes the delay, the vendor is entitled to penalty interest and the benefits of possession such as rent, and may claim any difference in the adjustments caused by the delay as compensation.
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Penalty interest runs every day until settlement, weekends and public holidays included, so even a short delay has a cost. A buyer relying on finance should ensure funds are available on the day to avoid default.
Law referenced: Contract default and interest conditions; Penalty Interest Rates Act 1983.