This clause allocates responsibility for bank charges incurred during the transaction, including wire transfer fees, returned check fees, overdraft charges, currency conversion fees, or other banking-related costs. It specifies which party must absorb these charges and under what circumstances. Bank charges differ from transaction fees in that they are typically imposed by financial institutions rather than payment processors, and they often arise unexpectedly (such as when a payment fails and must be re-submitted). The clause matters because bank charges can accumulate quickly, particularly in international transactions or when payments fail, and unclear allocation can lead to disputes about who should bear these costs.
Bank charges are often overlooked in contract negotiations but can become significant, especially in cross-border transactions where currency conversion and wire fees apply. A single failed payment attempt might trigger multiple fees from both the sending and receiving banks. If the contract doesn't address these charges, parties may dispute liability when unexpected fees appear on their statements. This clause also intersects with dispute resolution because disagreements about bank charge allocation frequently escalate into broader payment disputes.
Specify that each party is responsible for bank charges imposed by their own financial institution, which is the standard market practice. For wire transfers or international payments, clearly state whether the sending party pays all fees (including receiving bank fees) or whether fees are split. Establish a procedure for handling failed payments, including who pays re-submission fees and whether the transaction amount is adjusted to account for fees. Include language requiring parties to provide bank statements as evidence of charges incurred. For recurring payments, consider using payment methods with lower or more predictable fee structures. Document any special fee arrangements in writing and attach sample bank fee schedules if available.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause allocates responsibility for bank charges incurred during the transaction, including wire transfer fees, returned check fees, overdraft charges, currency conversion fees, or other banking-related costs. It specifies which party must absorb these charges and under what circumstances.
Why should I care about this clause?
Bank charges differ from transaction fees in that they are typically imposed by financial institutions rather than payment processors, and they often arise unexpectedly (such as when a payment fails and must be re-submitted). The clause matters because bank charges can accumulate quickly, particularly in international transactions or when payments fail, and unclear allocation can lead to disputes about who should bear these costs.
What are my options?
Bank charges are often overlooked in contract negotiations but can become significant, especially in cross-border transactions where currency conversion and wire fees apply. A single failed payment attempt might trigger multiple fees from both the sending and receiving banks.
How does this affect small businesses?
If the contract doesn't address these charges, parties may dispute liability when unexpected fees appear on their statements. This clause also intersects with dispute resolution because disagreements about bank charge allocation frequently escalate into broader payment disputes.