Whether a party to a contract may recover interest from another can be an important consideration when deciding to litigate over the contract. Some contracts specify that a particular interest rate applies, while others do not. In litigation over the latter type of contract, Utah courts that determined awarding interest is warranted generally would award simple interest at 10% per annum. Utah courts typically did so in reliance on Utah Code Ann. § 15-1-1(2) (“[u]nless parties to a lawful contract specify a different rate of interest, the legal rate of interest for the loan or forbearance of any money, goods, or chose in action shall be 10% per annum.”). Utah courts often awarded interest under this statute without regard to the type of contract at issue in the litigation. Accordingly, parties to a contract that does not specify a particular interest rate could justifiably anticipate that interest, if awarded, would be awarded at 10% per annum.
The Utah Supreme Court drastically altered this landscape in May 2016. In USA Power, LLC v. PacifiCorp, 2016 UT 20, 372 P.3d 629, the court recognized that its prior decisions suggested section 15-1-1(2) applied to all cases involving contracts without a specific interest rate. However, none of those prior decisions squarely addressed to what types of contracts section 15-1-1(2) applied. Relying upon the statutory language, the Utah Supreme Court determined section 15-1-1(2) applied only to contracts for the (A) “loan ... of any money [or] goods” or (B) “forbearance of any ... chose in action.” For purposes of this statute, a forbearance of any chose in action refers to a contract whereby one party agrees to not sue the other for a period of time in exchange for something else.
Thus, the Utah Supreme Court held that section 15-1-1(2)’s 10% interest rate applies only to contracts without a specific interest rate and “for the loan or forbearance of any money, goods, or chose in action.” For all other contracts without a specific interest rate, interest may be awarded, if at all, at the federal post-judgment interest rate in effect at the time of the judgment, plus 2%. See Utah Code Ann. § 15-1-4(3)(a). That interest rate shall apply to the “pre-judgment” period from breach to judgment, as well as to the “post-judgment” period from judgment to full collection of the judgment. Further, that interest rate shall remain the interest rate for the duration of the judgment even if the federal post-judgment interest rate changes.
There is one exception to these rules. For judgments under $10,000 based on contracts regarding the purchase of goods and services, interest may be awarded at the federal post-judgment interest rate in effect at the time of the judgment, plus 10%. See Utah Code Ann. § 15-1-4(3)(b).