What interest rate can we charge, and what does the contract have to say to get it?
R.C. 1343.01(A), as the Ninth District set it out, provides that the parties to a promissory note may stipulate therein for the payment of interest upon the amount thereof at any rate not exceeding eight per cent per annum payable annually. Where R.C. 1343.01 does not apply, R.C. 1343.03(A) entitles the creditor, when money becomes due and payable upon a judgment for the payment of money arising out of a contract, to interest at the rate determined under R.C. 5703.47, unless a written contract provides a different rate of interest in relation to the money, so a judgment creditor is entitled to a contractual rate instead of the statutory rate when the parties have a written contract and that contract provides a rate of interest with respect to money that becomes due and payable.
The trap
The contractual rate has to be in the right document. In Designers Choice the asset purchase agreement stated a purchase price of $355,000 and had no language about interest rates, while a separate promissory note said there would be no interest on that balance, repaid over 96 monthly instalments. Saying no interest accrues is not the same as stating a rate: because neither instrument gave a rate of interest for amounts that had become due and payable, and the acceleration clause said nothing about interest after acceleration or judgment, the creditor got the statutory rate anyway. The eight per cent figure in R.C. 1343.01(A) is the ceiling that subsection sets for a stipulation in a promissory note, and the exemptions and licensee provisions that displace a general usury ceiling in other states are not quoted in any authority listed here: no Ohio statutory text was available to check, so nothing in this rule tells you whether a particular lender or borrower is outside the section.
6 authorities
- case2020-Ohio-4617Designers Choice, Inc. v. Attractive Floorings, L.L.C.Ohio Ct. App. 9th Dist.decided 2020
The words that state the rule
Section 1343.01(A) provides that the parties to a promissory note “may stipulate therein for the payment of interest upon the amount thereof at any rate not exceeding eight per cent per annum payable annually * * *.”
- case2020-Ohio-4617Designers Choice, Inc. v. Attractive Floorings, L.L.C.Ohio Ct. App. 9th Dist.decided 2020
The words that state the rule
“Therefore, a judgment creditor is entitled to a contractual interest rate instead of the statutory rate ‘when (1) the parties have a written contract, and (2) that contract provides a rate of interest with respect to money that becomes due and payable.’” John Soliday Fin. Group, LLC v. Stutzman, 9th Dist. Wayne No. 08CA0046, 2009-Ohio-2081, ¶ 7, quoting First Bank of Ohio v. Wigfield, 10th Dist. Franklin Nos. 07AP-561, 07AP-562, 2008-Ohio-1278, ¶ 20.
- case2020-Ohio-4617Designers Choice, Inc. v. Attractive Floorings, L.L.C.Ohio Ct. App. 9th Dist.decided 2020
The words that state the rule
Section 1343.03(A) provides that, “when money becomes due and payable upon any * * * note, * * * the creditor is entitled to interest at the rate per annum determined pursuant to section 5703.47 of the Revised Code, unless a written contract provides a different rate of interest in relation to the money that becomes due and payable * * *.”
- case2020-Ohio-4617Designers Choice, Inc. v. Attractive Floorings, L.L.C.Ohio Ct. App. 9th Dist.decided 2020
The words that state the rule
Section 1343.03(A) provides that, “[i]n cases other than those provided for in section[ ] 1343.01 * * *,” “when money becomes due and payable upon any * * * judgment[ ] * * * for the payment of money arising out of * * * a contract * * *, the creditor is entitled to interest at the rate * * * determined pursuant to section 5703.47 * * *, unless a written contract provides a different rate of interest in relation to the money * * *.”
- case2020-Ohio-4617Designers Choice, Inc. v. Attractive Floorings, L.L.C.Ohio Ct. App. 9th Dist.decided 2020
The words that state the rule
The asset purchase agreement indicated that the purchase price was $355,000. It did not have any language regarding interest rates. A separate promissory note, however, detailed that there would be “no interest thereon” the $355,000, meaning that Attractive Floorings would repay the balance by making 96 monthly payments of $3,697.92.
- case2020-Ohio-4617Designers Choice, Inc. v. Attractive Floorings, L.L.C.Ohio Ct. App. 9th Dist.decided 2020
The words that state the rule
Although the parties’ agreement provided that no interest would accrue on the initial balance, allowing Attractive Floorings to space its payment of the $355,000 over 96 months, there is no language in the contract concerning the rate of interest that would apply to amounts that had become due and payable. The promissory note’s acceleration clause also does not provide that no interest will apply if the entire amount remaining immediately becomes due and payable or in the event of a judgment against Attractive Floorings. Accordingly, because the asset purchase agreement and promissory note do not provide “a different rate of interest in relation to the money that becomes due and payable,” we conclude that Designers Choice was entitled to post-judgment interest at the statutory rate. R.C. 1343.03(A). Designers Choice’s fourth assignment of error is sustained.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.