Contract Glossary
Grace Period
Definition
A specified window of time after a payment or obligation is due during which the obligated party can still perform without penalty or being considered in default. Grace periods are a built-in cushion, they acknowledge that real-world timing isn't always perfect and prevent technical defaults from triggering serious consequences.
In Practice
Your commercial lease requires rent on the first of each month. The lease includes a five-day grace period. If you pay on the 4th, no late fee, no default notice, no problem. Pay on the 6th, and the landlord can charge the late fee specified in the lease. Pay on the 15th, and they might issue a notice of default. The grace period protects you from minor delays, a slow bank transfer or a holiday weekend, without jeopardizing your tenancy.
Example Clause
Any payment due under this Agreement shall be considered timely if received within five (5) business days of the applicable due date (the 'Grace Period'). Failure to make payment within the Grace Period shall constitute a default, and the non-defaulting Party may exercise any remedies available under this Agreement or at law.
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