YOUR CONTRACT DOESN’T CALL FOR INTEREST?
You may not be completely out of luck.
As I pointed out in a previous article, if you want to charge interest to your customers for past due monies, you need to provide for it in your initial agreement. I also pointed out that it is very difficult to comply with the various requirements in connection with money owed by consumers as opposed to businesses. Generally, unless you are doing a high volume of this work and the interest earnings are significant, most businesses would want to refrain from charging consumers interest.
But let us assume, for a moment, that you have not provided for interest in your initial agreement and you want to charge interest to a business for past due monies. In limited circumstances, Indiana law provides for pre-judgment interest. However, it is only available as an award to a recovery in court where the judge or jury does not have to exercise judgment in order to assess the amount of damages. So, if the amount you are owed is readily ascertainable and calculated by a simple mathematical computation, you may be able to get your pre-judgment interest. If the amount owed is disputed in good faith or if the time for such payments is not easily determined, the court may not award the pre-judgment interest.
If you can establish your claim for pre-judgment interest, what is the amount that can be recovered? Currently, under Indiana law, the rate would be a simple interest rate (no compounding) set by the court between 6% and 10% per year.
Obviously, it would be better to have contracted for interest initially, but keep in mind this possible save on the issue of interest if you need to resort to litigation to collect what you are owed and wish to be compensated for the time value of money.