Also known as: legal rates · lawful rate · statutory rate
Written by attorneys — see sources below.
The interest rate imposed as a matter of law when none is provided by contract. It supplies the default measure for prejudgment interest on monetary recoveries in contract and lease disputes and for certain statutory obligations such as pecuniary devises.
Lighthouse Shipping leased warehouse space from Lattice Systems. Lattice allowed the roof to leak repeatedly, forcing Lighthouse to incur extra storage costs over two years. After Lighthouse recovered those costs as damages, the court added interest at the legal rate for the period Lighthouse had been deprived of the funds. The addition compensated Lighthouse for the time value of the money withheld during the litigation.
Lucas Lee leased farmland to Lars Lindstrom under a 1987 agreement that contained no interest clause. After a court determined Lindstrom owed Lee a share of the profits, the court applied the legal rate of ten percent per annum to the amounts due. The statutory rate governed because the lease was silent on interest.
In November 1987, Alva A. Young, Sr. created the Alva A. Young Trust for the benefit of his wife Emily P. Young, his five children Alva Jr., Sid, Joe, Hal, and Sis, and his grandchildren. The trust assets included real property, water and irrigation stock, items of farm machinery, and several bank accounts, with Alva Sr., Emily, and Alva Jr. named as trustees. In 1987, some of the trust property was leased to Sid and his wife Cecilia to conduct farming operations, under which Sid and Cecilia were obligated to pay fifty percent of the profits from the leased property to the trust. Alva Sr. died on July 30, 1989, at which time the corpus of the trust was valued at $728,505. Following Alva Sr.'s death, Emily executed a warranty deed on June 2, 1990, and a grant deed on June 28, 1990, purporting to convey the trust property in equal amounts to two trusts she identified as the Alva A. Young Family Trust and the Emily P. Young Trust. Emily also conveyed her own water shares to a trust identified as the Emily P. Young Family Trust. Emily died on August 18, 1993. After Emily's death, Alva Jr. found a yellow envelope among her possessions labeled "Cash Loans" containing checks and an itemization showing $100,000 delivered to Sid from two bank loans secured by trust assets. In 1994, Alva Jr., as personal representative for the estates of Alva Sr. and Emily and as successor trustee for the 1987 trust, brought suit against the defendants to resolve disputes over trust interpretation, asset allocation, deed validity, advancements, loans, and farm lease obligations. A bench trial was held in January of 1996. Defendants appealed the judgment entered in favor of plaintiff to the Supreme Court of Utah.
View caseInterest at the legal rate is added when the tenant recovers a definite monetary loss caused by the landlord's breach. The interest compensates for the period the tenant was deprived of the funds and runs for the time appropriate under the circumstances.
No. When the lease is silent, the law supplies interest at the legal rate on the amount recovered for an appropriate period. An express contractual provision is not required.
The statutory legal rate applies. Utah Code section 15-1-1 sets the legal rate at ten percent per annum when the parties have not specified a different rate.