Contractors who are owed money for their work on Louisiana construction projects may be entitled to prejudgment interest on their past-due receivables. Unlike common law jurisdictions, in Louisiana interest on claims for nonpayment is not viewed as penal in nature, but rather is considered as a reparation for the loss suffered by the creditor.1 In most instances, a victorious party on a claim for nonpayment will be allowed to recover interest on past due payments, although trial courts seemingly have some discretion in determining when interest should begin to accrue in the absence of an agreement on the issue.
The date from which prejudgment interest begins to run, and the amount of interest due, may depend on different factors, including whether the case may be deemed “highly complicated.” For instance, where a claim may be considered unliquidated, courts have held that prejudgment interest should run from the date of judicial demand,2 which is the date a lawsuit is filed. Otherwise, courts will generally allow interest to run from the “moment of an active violation of the contract” for easily-determined past due amounts.3
Where the terms of a written contract provide for a specified timeframe by which interest begins to accrue, courts will generally enforce such terms.4 For instance, where a contract provides that receivables will bear interest after they are more than 30 days past due, interest will begin to accrue on the 31st day. Additionally, where an agreement specifies a particular rate of interest, such provisions are enforceable under Louisiana law.5
Throughout the litigation, the plaintiff made numerous attempts at settlement and was seeking to hold our client liable for over $250,000 in damages.
Even where a contract is silent as to the interest rate and time period whereby interest begins to accrue, certain statutes may provide the terms of such prejudgment interest accrual. For example, La. R.S. 9:2784, otherwise known as the Louisiana Prompt Pay Statute, provides that a subcontractor is entitled to interest at the rate of one-half of one percent, per day, for late payments not made by the contractor within 14 days after it receives payment from the owner.6
Where no contractual provision or statute applies to a claim for prejudgment interest, courts will typically apply the legal rate of interest published annually by the Louisiana Commissioner of Financial Institutions. Currently, for 2019, the judicial interest rate is 6 percent (6%) per annum.
To eliminate uncertainty as to precisely when past due receivables may begin to bear interest, as well as the rate of interest that would become due, it is important to have a written contract specifying such interest terms. Such terms should be carefully crafted, however, to avoid abrogating any statutory protections, but to also maximize protections against excessive payment delays.
Ted Laperouse is an attorney and shareholder with LAPEROUSE, APLC in Baton Rouge, Louisiana whose practice is focused on construction law and business law.
Contractors Shouldn’t Overlook the Value of Interest on Construction Claims
1 See, Trans-Global Alloy, Ltd. v. First Nat. Bank of Jefferson Parish, 583 So.2d 443 (La. 1991).
2 Id; See also, Boes Iron Works, Inc. v. Gee Cee Group, Inc., 206 So.3d 938 (La.App. 4 Cir. 2016).
3 LSA-C.C. Art. 2000; See also, L&A Contracting Co., Inc. v. Ram Indus. Coatings, Inc., 762 So.2d 1223 (La.App. 1 Cir. 2000).
4 LSA-C.C. Art. 2000.
5 LSA-C.C. Art. 2000.
6 La. R.S. 9:2784. It should be noted that this amount is capped at 15 percent of the total outstanding balance due.