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Pre and Post Judgment Interest in Your Contracts Are Important to Have


If you go to court and a court awards you a dollar figure to compensate you for financial losses, it isn’t just the damages that stem from the contract that the court will award you. There is also something known as prejudgment interest. This kind of interest can add up, compensating you more fully for financial losses, and so it’s something that business owners with legal claims should understand.

Why Prejudgment Interest?

The concept of prejudgment interest is easy to understand. If someone has cheated you out of money, or taken your money, or refused to pay you, and you sue it could be an extended period of time before you get that money back, if your case were to go all the way to trial.

Even if you win your case, and are awarded all of your damages, you have been deprived of that money for a long time—from long before the judgment was entered. Like any loan, the deprivation of the use of your money has a value to it, just like any interest is paid on any loan.

Getting Prejudgment Interest

That means that when a court enters an award in your favor, it will calculate prejudgment interest on the amount that is owed to you. Interest is simply a calculation, which is awarded automatically along with the verdict entered in your favor—you don’t need to “prove” interest to a jury, or show that you are entitled to the interest.

How Much Do You Get?

How much interest you get on your judgment depends on what was in your contract. Some contracts will have a prejudgment interest rate in them (which can be as high as the statutory usury rate). If your contract is silent as to prejudgment interest, you still get interest but will be capped at what the current statutory cap on prejudgment interest is. Statutory interest rates fluctuate yearly, but generally range from 4%-8%.

If you didn’t have a prejudgment interest provision in your contract, the statutory interest is still nothing to ignore—it can add up and add to your judgment significantly. At, say, a statutory interest rate of 5%, if you had a judgment of $100,000, that’s $5,000 a year. If your losses go back three years before the judgment, that can add $15,000 to your judgment.

Adding Post Judgment Interest

Prejudgment interest is also important, because you can get post judgment interest if you win a verdict. That post judgment interest is calculated on both your base verdict, and your prejudgment interest. Again, you can specify the amount of post judgment interest, or you can rely on the statutory interest rate if your contract is silent as to interest.

Your contracts should always include interest, both pre and post judgment, and when you make claims in attempts to settle disputes, don’t forget to add on that prejudgment interest that you would get, if you went to trial and won.

Make sure your business contracts protect you as much as possible. If you have a contract or commercial litigation claim, call the West Palm Beach business litigation lawyers at Pike & Lustig today.




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