What interest rate applies to money owed under our contract if the contract itself does not fix a rate?
12% per year, by default, whenever the contract does not fix a different rate in an express written agreement. Idaho Code § 28-22-104(1): "When there is no express contract in writing fixing a different rate of interest, interest is allowed at the rate of twelve cents (12¢) on the hundred by the year" on money due by express contract, money after it becomes due, money lent, money received to another's use and retained beyond a reasonable time, money due on a settled mutual account, and money due on an open account after three months from the last item. A DIFFERENT, separate rate applies once a court enters JUDGMENT: § 28-22-104(2) sets the legal rate on a judgment at "five percent (5%) plus the base rate in effect at the time of entry of the judgment," with the base rate reset annually every July 1 by the state treasurer from the one-year U.S. Treasury constant-maturity yield, rounded up to the nearest 1/8%, and applied on a 365-day-year basis.
The trap
The two rates in § 28-22-104 answer two different questions and are not interchangeable: subsection (1)'s 12% is a PRE-JUDGMENT default that a written contract can displace by fixing its own rate; subsection (2)'s 5%-plus-base-rate is the POST-JUDGMENT rate that applies to the judgment itself once entered, and it is set annually by the state treasurer rather than by the parties. Be careful about what subsection (2) does not say: it fixes the legal rate on a judgment and says nothing either way about a contract rate carrying past entry of judgment, so it is not an answer to that question. A contract that is silent on interest, or that fixes a rate only informally (not in an express WRITING), falls back to the 12% default under subsection (1) even if the parties otherwise understood a different rate: the statute's own text requires the different rate to be fixed by an "express contract in writing." Note also that subsection (1)'s open-account rule has its own three-month trigger ("Money due upon open accounts after three (3) months from the date of the last item"): interest on an open account does not start running from the account's inception. One more thing this section is not: a ceiling. Title 28, chapter 22 of the Idaho Code runs to four sections, §§ 28-22-104 through 28-22-107, and the last three are about dishonored checks; none of them caps a rate the parties fix in an express writing. Idaho puts that kind of regulation in its credit code, whose stated purposes include "the law governing installment sales, credit, loans and usury", so a consumer or other regulated-credit transaction has to be checked there and not here.
5 authorities
- statuteIdaho Code § 28-22-104enactment date not established
The words that state the rule
When there is no express contract in writing fixing a different rate of interest, interest is allowed at the rate of twelve cents (12¢) on the hundred by the year on:
- statuteIdaho Code § 28-22-104enactment date not established
The words that state the rule
1. Money due by express contract. 2. Money after the same becomes due. 3. Money lent. 4. Money received to the use of another and retained beyond a reasonable time without the owner’s consent, express or implied. 5. Money due on the settlement of mutual accounts from the date the balance is ascertained. 6. Money due upon open accounts after three (3) months from the date of the last item.
- statuteIdaho Code § 28-22-104enactment date not established
The words that state the rule
The legal rate of interest on money due on the judgment of any competent court or tribunal shall be the rate of five percent (5%) plus the base rate in effect at the time of entry of the judgment.
- statuteIdaho Code § 28-22-104enactment date not established
The words that state the rule
The base rate shall be determined on July 1 of each year by the Idaho state treasurer and shall be the weekly average yield on United States treasury securities as adjusted to a constant maturity of one (1) year and rounded up to the nearest one-eighth percent (1/8%). The base rate shall be determined by the Idaho state treasurer utilizing the published interest rates during the second week in June of the year in which such interest is being calculated. The legal rate of interest as announced by the treasurer on July 1 of each year shall operate as the rate applying for the succeeding twelve (12) months to all judgments declared during such succeeding twelve (12) month period. The payment of interest and principal on each judgment shall be calculated according to a three hundred sixty-five (365) day year.
- statuteIdaho Code § 28-41-102enactment date not established
The words that state the rule
(2) The underlying purposes and policies of this act are: (a) To simplify, clarify and modernize the law governing installment sales, credit, loans and usury;
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.