diff --git a/e2e/create-invoice.spec.ts b/e2e/create-invoice.spec.ts
index a7c3fc2b..154e0ca5 100644
--- a/e2e/create-invoice.spec.ts
+++ b/e2e/create-invoice.spec.ts
@@ -21,6 +21,23 @@ test.describe('Create invoice flow', () => {
     await expect(createPage.totalAmountInput).toHaveValue('200');
   });
 
+  test('back button returns to previous step without losing entered data', async ({ page }) => {
+    const createPage = new CreateInvoicePage(page);
+    await createPage.goto();
+
+    await createPage.fillRecipient('GBRPYHIL2CI3WHZDTOOQFC6EB4KJJGUJQDP7DC3K2YSJEIPQ76PQXI');
+    await createPage.fillAmount('150');
+    await createPage.clickNext();
+
+    await expect(createPage.backButton).toBeVisible();
+    await createPage.clickBack();
+
+    await expect(createPage.recipientInput).toHaveValue(
+      'GBRPYHIL2CI3WHZDTOOQFC6EB4KJJGUJQDP7DC3K2YSJEIPQ76PQXI',
+    );
+    await expect(createPage.amountInput).toHaveValue('150');
+  });
+
   test('fill form and submit redirects', async ({ page }) => {
     const createPage = new CreateInvoicePage(page);
     await createPage.goto();
diff --git a/src/hooks/__tests__/usePaymentSubmission.test.ts b/src/hooks/__tests__/usePaymentSubmission.test.ts
new file mode 100644
index 00000000..08dee75c
--- /dev/null
+++ b/src/hooks/__tests__/usePaymentSubmission.test.ts
@@ -0,0 +1,138 @@
+import { describe, it, expect, vi, beforeEach } from "vitest";
+import { renderHook, act, waitFor } from "@testing-library/react";
+
+const mockSimulateTransaction = vi.hoisted(() => vi.fn());
+
+vi.mock("@/lib/simulateTx", () => ({
+  simulateTransaction: mockSimulateTransaction,
+}));
+
+import {
+  usePaymentSubmission,
+  isRateLockExpired,
+} from "../usePaymentSubmission";
+
+describe("isRateLockExpired", () => {
+  it("returns false when there is no rate lock", () => {
+    expect(isRateLockExpired(null)).toBe(false);
+    expect(isRateLockExpired(undefined)).toBe(false);
+  });
+
+  it("returns false before expiry", () => {
+    const lock = { currency: "USD", rate: 0.1, expiresAt: 1000 };
+    expect(isRateLockExpired(lock, 500)).toBe(false);
+  });
+
+  it("returns true at or after expiry", () => {
+    const lock = { currency: "USD", rate: 0.1, expiresAt: 1000 };
+    expect(isRateLockExpired(lock, 1000)).toBe(true);
+    expect(isRateLockExpired(lock, 1500)).toBe(true);
+  });
+});
+
+describe("usePaymentSubmission", () => {
+  beforeEach(() => {
+    vi.clearAllMocks();
+    if (typeof window !== "undefined") {
+      localStorage.clear();
+    }
+  });
+
+  it("initializes with a clean state", () => {
+    const { result } = renderHook(() => usePaymentSubmission());
+    expect(result.current.state).toEqual({
+      showSimulationPreview: false,
+      isSimulating: false,
+      simulationResult: null,
+      simulationError: null,
+      rateLockExpired: false,
+    });
+  });
+
+  it("runs a simulation and stores the result on initiateDemoPayment", async () => {
+    mockSimulateTransaction.mockResolvedValue({
+      success: true,
+      fee: 100,
+      effects: [],
+    });
+
+    const { result } = renderHook(() => usePaymentSubmission());
+    const onConfirm = vi.fn().mockResolvedValue(undefined);
+    const onCancel = vi.fn();
+
+    await act(async () => {
+      await result.current.initiateDemoPayment("xdr-123", onConfirm, onCancel);
+    });
+
+    expect(mockSimulateTransaction).toHaveBeenCalledWith("xdr-123");
+    expect(result.current.state.showSimulationPreview).toBe(true);
+    expect(result.current.state.isSimulating).toBe(false);
+    expect(result.current.state.simulationResult).toEqual({
+      success: true,
+      fee: 100,
+      effects: [],
+    });
+    expect(result.current.state.simulationError).toBeNull();
+  });
+
+  it("surfaces a simulation error without throwing", async () => {
+    mockSimulateTransaction.mockRejectedValue(new Error("RPC unreachable"));
+
+    const { result } = renderHook(() => usePaymentSubmission());
+
+    await act(async () => {
+      await result.current.initiateDemoPayment(
+        "xdr-bad",
+        vi.fn(),
+        vi.fn(),
+      );
+    });
+
+    expect(result.current.state.isSimulating).toBe(false);
+    expect(result.current.state.simulationError).toBe("RPC unreachable");
+  });
+
+  it("blocks initiation when the rate lock has already expired", async () => {
+    const { result } = renderHook(() => usePaymentSubmission());
+    const expiredLock = { currency: "USD", rate: 0.1, expiresAt: 1 };
+
+    await act(async () => {
+      await result.current.initiateDemoPayment(
+        "xdr-123",
+        vi.fn(),
+        vi.fn(),
+        { rateLock: expiredLock },
+      );
+    });
+
+    expect(mockSimulateTransaction).not.toHaveBeenCalled();
+    expect(result.current.state.rateLockExpired).toBe(true);
+    expect(result.current.state.simulationError).toMatch(/rate lock/i);
+  });
+
+  it("resetState clears simulation state back to defaults", async () => {
+    mockSimulateTransaction.mockResolvedValue({
+      success: true,
+      fee: 1,
+      effects: [],
+    });
+    const { result } = renderHook(() => usePaymentSubmission());
+
+    await act(async () => {
+      await result.current.initiateDemoPayment("xdr", vi.fn(), vi.fn());
+    });
+    expect(result.current.state.showSimulationPreview).toBe(true);
+
+    act(() => {
+      result.current.resetState();
+    });
+
+    expect(result.current.state).toEqual({
+      showSimulationPreview: false,
+      isSimulating: false,
+      simulationResult: null,
+      simulationError: null,
+      rateLockExpired: false,
+    });
+  });
+});
diff --git a/src/lib/invoiceStatus.test.ts b/src/lib/invoiceStatus.test.ts
new file mode 100644
index 00000000..63939b7b
--- /dev/null
+++ b/src/lib/invoiceStatus.test.ts
@@ -0,0 +1,124 @@
+import { describe, it, expect, beforeEach } from "vitest";
+import {
+  canTransition,
+  canReleaseInvoice,
+  getReleaseCheck,
+  isReleaseBlocked,
+  transitionToDisputed,
+  transitionToReleased,
+  STATUS_TRANSITIONS,
+} from "./invoiceStatus";
+import { createMilestone, addCondition } from "./invoiceMilestones";
+import { createDispute } from "./arbitrators";
+
+describe("invoiceStatus state machine", () => {
+  beforeEach(() => {
+    if (typeof window !== "undefined") {
+      localStorage.clear();
+    }
+  });
+
+  describe("canTransition", () => {
+    it("allows transitions listed in STATUS_TRANSITIONS", () => {
+      for (const from of Object.keys(STATUS_TRANSITIONS) as Array<
+        keyof typeof STATUS_TRANSITIONS
+      >) {
+        for (const to of STATUS_TRANSITIONS[from]) {
+          expect(canTransition(from, to)).toBe(true);
+        }
+      }
+    });
+
+    it("rejects transitions that are not listed", () => {
+      expect(canTransition("Pending", "Released")).toBe(false);
+      expect(canTransition("Released", "Funded")).toBe(false);
+    });
+
+    it("rejects any transition out of Archived", () => {
+      expect(canTransition("Archived", "Pending")).toBe(false);
+      expect(STATUS_TRANSITIONS.Archived).toHaveLength(0);
+    });
+  });
+
+  describe("getReleaseCheck / canReleaseInvoice / isReleaseBlocked", () => {
+    it("allows release when there are no milestones and no disputes", () => {
+      const check = getReleaseCheck("inv-no-milestones");
+      expect(check.allowed).toBe(true);
+      expect(check.reasons).toHaveLength(0);
+      expect(canReleaseInvoice("inv-no-milestones")).toBe(true);
+      expect(isReleaseBlocked("inv-no-milestones")).toBe(false);
+    });
+
+    it("blocks release when a required milestone condition is unmet", () => {
+      const invoiceId = "inv-with-milestone";
+      const milestone = createMilestone(invoiceId, 100);
+      addCondition(invoiceId, milestone.id, {
+        type: "deliverable",
+        description: "Deliver final asset",
+        required: true,
+      });
+
+      const check = getReleaseCheck(invoiceId);
+      expect(check.allowed).toBe(false);
+      expect(check.reasons).toContain(
+        "Milestone conditions have not been satisfied",
+      );
+      expect(canReleaseInvoice(invoiceId)).toBe(false);
+      expect(isReleaseBlocked(invoiceId)).toBe(true);
+    });
+
+    it("blocks release when the invoice has an active dispute", () => {
+      const invoiceId = "inv-disputed";
+      createDispute({
+        invoiceId,
+        initiator: "GRAISER",
+        respondent: "GCOUNTER",
+        reason: "Work not delivered",
+        description: "Deliverable was never provided.",
+      });
+
+      const check = getReleaseCheck(invoiceId);
+      expect(check.allowed).toBe(false);
+      expect(check.reasons).toContain("Invoice has an unresolved dispute");
+    });
+  });
+
+  describe("transitionToDisputed", () => {
+    it("returns Disputed when transition is valid", () => {
+      expect(transitionToDisputed("Funded")).toBe("Disputed");
+    });
+
+    it("throws when transition is invalid", () => {
+      expect(() => transitionToDisputed("Archived")).toThrow(
+        /Invalid status transition/,
+      );
+    });
+  });
+
+  describe("transitionToReleased", () => {
+    it("returns Released when transition is valid and release is unblocked", () => {
+      const invoiceId = "inv-release-ok";
+      expect(transitionToReleased(invoiceId, "Funded")).toBe("Released");
+    });
+
+    it("throws when the status transition itself is invalid", () => {
+      expect(() => transitionToReleased("inv-x", "Pending")).toThrow(
+        /Invalid status transition/,
+      );
+    });
+
+    it("throws when release is blocked by an unmet milestone", () => {
+      const invoiceId = "inv-release-blocked";
+      const milestone = createMilestone(invoiceId, 100);
+      addCondition(invoiceId, milestone.id, {
+        type: "approval",
+        description: "Client sign-off",
+        required: true,
+      });
+
+      expect(() => transitionToReleased(invoiceId, "Funded")).toThrow(
+        /Release blocked/,
+      );
+    });
+  });
+});
diff --git a/src/lib/invoiceStatus.ts b/src/lib/invoiceStatus.ts
index b634cd52..635a7fe4 100644
--- a/src/lib/invoiceStatus.ts
+++ b/src/lib/invoiceStatus.ts
@@ -1,8 +1,5 @@
-import {
-  areMilestoneConditionsSatisfied,
-  getInvoiceMilestones,
-} from "./invoiceMilestones";
-import { getActiveDispute } from "./invoiceDisputes";
+import { getMilestones, canReleaseMilestone } from "./invoiceMilestones";
+import { getDisputesByInvoice, isDisputeActive } from "./arbitrators";
 
 export type InvoiceStatus =
   | "Pending"
@@ -125,13 +122,18 @@ export function canReleaseInvoice(invoiceId: string): boolean {
 export function getReleaseCheck(invoiceId: string): ReleaseCheckResult {
   const reasons: string[] = [];
 
-  const dispute = getActiveDispute(invoiceId);
-  if (dispute) {
+  const activeDispute = getDisputesByInvoice(invoiceId).some((d) =>
+    isDisputeActive(d),
+  );
+  if (activeDispute) {
     reasons.push("Invoice has an unresolved dispute");
   }
 
-  const milestones = getInvoiceMilestones(invoiceId);
-  if (milestones.length > 0 && !areMilestoneConditionsSatisfied(invoiceId)) {
+  const milestones = getMilestones(invoiceId);
+  const unmetMilestones = milestones.filter(
+    (m) => !m.released && !canReleaseMilestone(m),
+  );
+  if (unmetMilestones.length > 0) {
     reasons.push("Milestone conditions have not been satisfied");
   }