Prior to October 1, 2011, statutory interest was announced once a year by the Chief Financial Officer. Go to this page to check the current statutory interest rate. Beginning October 1, 2011, statutory interest will be announced once a quarter. Because of the ways in which statutory interest rates are used by the courts, this has led to some confusion in one area: prejudgment interest.
Prejudgment interest is an element of damages awarded primarily in contract cases. The point of contract damages is to put the injured party where they would have been had the breaching party fulfilled their end of the contract. The simplest example would be a promise to pay money: the damages on breaking that promise is the sum not paid. But to truly make the injured party whole, interest on that sum from the time the money should have been paid to the time of judgment is calculated by the court using the statutory interest rate in effect when the money should have been paid (the date of loss), and added to the judgment amount. Then, the total judgment amount accrues interest at the statutory rate in effect when the judgment is entered until the judgment is paid. So, in practice, one interest rate from say, 2008, would apply for prejudgment interest and another from a later year would apply for judgment interest.Starting with October 2011, statutory interest will be announced every quarter, and judgment interest will be adjusted annually. This will affect judgment interest in two ways. First, the quarterly statement in effect when the judgment is entered will apply. Thereafter, on January 1st of every year, the judgment interest will change. Really not that big of a deal.
My Website
Copyright 2012 Julie Ann Sombathy All Rights Reserved
