Posted in Blog, Commercial Litigation by

By Joseph G. Ballstaedt
[email protected]

The answer to this question is quite simple. Under Utah law, people who enter a contract can agree to any interest rate they want, but if they do not agree to a specific rate, the default rate under Utah law is ten percent (10%) per annum. As explained below, this rate applies to several types of legal contracts, not just written contracts.

The Ten-Percent Default Rate

The language of the relevant Utah statute explains: “Unless the parties to a lawful written, verbal, or implied contract expressly specify a different rate of interest, the legal rate of interest for the contract . . . is 10% per annum.” Let me discuss each of the types of contracts that are subject to this default interest rate.

Written Contracts

A lawful written contract is, as you would expect, a contract that parties agree to and sign in a written document, whether it is a piece of paper or an e-mail exchange in which the parties agree to specific contract terms. This type of contract generally involves the key elements of a contract: offer and acceptance. Once one person offers contract terms, and the other accepts those terms in a written document without any significant change to those terms and without any conditions, a lawful written contract exists. If the parties do not specifically set forth in writing an interest rate for any money owed to the other, the statutory rate of ten percent applies.

Oral Contracts

A lawful contract can also be an oral contract, executed without any written document or signature. In most circumstances, an oral contract is just as enforceable as a written contract, although the terms of the contract may be extremely difficult to prove if the parties dispute the agreed-upon terms. Also, if the statute of frauds applies, a contract must be in writing. (The most common type of contract that is subject to the statute of frauds and must be in writing is a contract for the sale of land.) Like written contracts, if parties to an oral contract do not specifically state an interest rate for any money owed to the other, the statutory rate of ten percent applies.

Implied Contracts

The next type of contract is a type that forms without offer and acceptance, the normal method of entering a contract. Sometimes parties exchange goods or services without a clear offer and acceptance, and it would be unjust if a contract relationship did not exist and one party could avoid payment obligations. These types of interactions form “implied contracts” or a quantum meruit claim. There are two types of implied contracts: contracts implied in law (also known as unjust enrichment) and contracts implied in fact.

A contract implied in law exists when one person receives a benefit, and it would be unjust for the other person to not pay for it. For example, let’s say that I know my neighbor hired a new lawnmowing company, and the first time the company shows up to mow my neighbor’s lawn, the company mistakenly starts mowing my lawn. I don’t correct the problem because I want my lawn mowed. Even though I didn’t ask the company to mow my lawn, I almost certainly owe the company a reasonable fee for the services they provided under a contract implied in law. It would be unjust for me to be enriched without providing proper payment. And if I withhold payment, the amount I owe probably increases with interest at the statutory rate of ten percent.

A contract implied in fact is similar. A party requests work, but the other party does not accept the request before performing the work, and both parties should know that payment is expected. Let’s say, for example, that we change the facts of the above example, and I instead requested the lawnmowing company to come mow my lawn, but the company and I never discussed a price term or any other key terms to a traditional contract. If the company comes and mows my lawn, even though we didn’t hammer out the details of payment, I knew that the company expected reasonable payment, and I must provide a reasonable payment. A contract relationship exists, and if I don’t pay, the debt I owe is probably subject to the statutory interest rate of ten percent.

Help with Contracts

If you need help drafting a contract, enforcing a contract, collecting unpaid amounts and interest on a contract, or addressing any other contract issue, I would love to help. I offer a free initial consultation. My direct dial is 801-365-1021, and you can e-mail me at [email protected].


Joseph G. Ballstaedt
[email protected]


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