Lately due to the economy we’re doing a lot of collection litigation. Many times the collection is based on a contract and in the contract is the annual rate of interest that will be charged on default and all amounts associated with collecting the debt. Often those rates are over 20% of interest per year.
The Courts will enforce those interest rates because, as the Supreme Court of Canada has said, contract law is not the enemy of the parties but its’ servant. This means that where two parties, particularly in a business context, agree to an annual interest rate that doesn’t violate the Canadian Interest Act, the defaulting party is going to pay that rate of interest.
These days many people are realizing that high rates of interest are hard to dig out of.
As always, the best legal advice one can be given is: know what you’re signing and if you cannot afford it: don’t sign.
Inga B. Andriessen, Principal Lawyer