Payment term legislation in Montenegro

Yes, payment terms in commercial transactions are subject to the Law on deadlines for settlement of financial obligations (“Official Gazette of Montenegro”, no. 28/2014, in Montenegrin: Zakon o rokovima izmirenja novčanih obaveza, “Law”). The Law applies to all commercial transactions, (i.e. between public sector and business entities) with the aim of preventing the settlement of financial obligations within the deadline.

2. Is there a standard payment term set out in law? If so, what is it?

The Law requires private undertakings to pay their invoices within 30 calendar days.

In commercial transactions where the debtors are public authorities or public undertakings, the payment period is also 30 days. Longer payment term can be agreed upon, but such a term cannot exceed 60 calendar days. In addition, the statutory payment period can be extended when the debtor is the Healthcare Insurance Fund or user of the Healthcare Insurance Fund, up to a maximum of 90 calendar days.

3. In what circumstances may parties contractually agree to extend payment beyond the standard payment term?

The Law allows for an exception to the statutory payment term for commercial transactions between businesses where the debtor or contract beneficiary has provided security in the form of a bank guarantee, which contains a clause “irrevocable”, “unconditional”, “collectible upon the first call without contestation” or promissory notes endorsed by a bank. Another exception is made for entities classified in the category of small legal entities, with whom longer payment terms can be agreed.  However, such  term cannot exceed 90 calendar days. This exception is not applicable to small legal entities, which are affiliated with medium or large legal entities.

4. May an obligation beyond the standard payment term be evidenced in a PO?

Yes, assuming that the PO is a standard contract or refers to the framework contract. Any payment term beyond 30 days must be expressly stated in the contract and be qualified as an exemption to the statutory payment period.

5. Are there any penalties for breach of payment term legislation other that a civil claim of the seller?

Yes, creditors are entitled to claim interest arising from late payment. The creditors can also claim compensation for costs in recovering the incurred debt.

Late payment also constitutes a misdemeanor for legal entities, that is sanctioned by an administrative fine from EUR 1,000 to EUR 10,000. The responsible person in such legal entities may be fined from EUR 500 to EUR 2,000.

6. Is there any special legislation regarding payment obligations for the COVID-19 situation?

No such legislation has yet been adopted.

Picture of Tamara Samardzija
Tamara Samardžija