Opinion ID: 2303411
Heading Depth: 3
Heading Rank: 2

Heading: Types of Interest

Text: Although at times TruServ has used the terms interchangeably, [7] there is a distinction between contractual interest and prejudgment interest. [8] Where a contract provides for the payment of money and one party breaches the contract by failing to pay, the nonbreaching party may recover interest on the amount owed under the contract in one of two ways. First, [i]nterest may be reserved by the terms of the contract between the parties and is then called conventional or contractual interest.  See 25 Williston on Contracts § 66:109 (4th ed.) (emphasis added). Alternatively, where the parties to a contract have not specifically addressed the payment of interest in the terms of the contract, the nonbreaching party may recover, as damages, interest on the amount due under the contract. See id. (citing Restatement (Second) of Contracts § 354). This Court has referred to interest awarded as damages in such circumstances as prejudgment interest. See Fernandez v. Levin, 519 Pa. 375, 379, 548 A.2d 1191, 1193 (1988). The annual contractual rate of interest set forth in the Retail Member Agreement (18%) is higher than the statutory prejudgment interest rate in Pennsylvania (6%); thus, the type of interest, if any, to which TruServ is entitled, will affect the amount of that interest. Accordingly, we must consider these two distinct concepts in further detail, as applied to the case sub judice.