Prejudgment interest

A buyer or seller suing over an unpaid purchase price, a holdback or an earn-out may ask for prejudgment interest on top of the amount owed. It addresses the time between the day the claim arose and the day of the order, and it is governed by court legislation. This entry covers Ontario and British Columbia.

Ontario

Section 128(1) of the Courts of Justice Act entitles a person who is entitled to a payment order to claim interest at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order. Section 128(4) lists cases where interest shall not be awarded under that subsection, including interest on costs, an order made on consent except by consent of the debtor, and where interest is payable by a right other than under the section. Section 130(1) lets the court, where it considers it just, disallow interest, allow a higher or lower rate, or allow interest for a different period.

British Columbia

Under s. 1(1) of the Court Order Interest Act, and subject to section 2, a court must add to a pecuniary judgment interest at a rate the court considers appropriate in the circumstances, from the date the cause of action arose to the date of the order. Section 2 says the court must not award it where the parties have an agreement about interest or the creditor has waived the right in writing, among other cases. Check how the purchase agreement treats interest on late amounts, and see common post-closing disputes.