Legal Memorandum: Awarding prejudgment interest is rationalized by the principle of fairness

Issue: Under Illinois law, what is the rationale for the award of prejudgment interest?

Prejudgment interest focuses on the principle of fairness and the concept of fully compensating an injured party for a monetary loss. See Milligan v. Gorman, 348 Ill. App. 3d 411, 416 (2004). "’If a creditor is denied payment of a sum rightfully his, he loses not only that sum but the right to use it. In our society, the use of money is worth money.’" Milligan, 348 Ill. App. 3d at 416 (quoting Haas v. Cravatta, 71 Ill.App.3d 325, 332 (1979)); see also In re Estate of Wernick, 127 Ill.2d 61, 87 (1989) (prejudgment interest compensates for wrongful withholding of money owed and loss of ability to use it). Prejudgment interest can be awarded pursuant to statute, as agreed to by the parties or otherwise warranted by equitable considerations. See Progressive Land Developers, Inc. v. Exchange National Bank of Chicago, 266 Ill. App. 3d 934, 945 (1994) (citing Estate of Wernick, 127 Ill.2d 61, 86-87 (1989)).

Statutorily, the IIA states that "[c]reditors shall be allowed to receive" 5% per annum as prejudgment interest on money due and owing to them in any one of several different situations. [statref]815 ILCS 205/2 (West 2014)[/statref]. This would include "for all moneys after they become due on any bond, bill, promissory note, or other instrument of writing," and "on money withheld by an unreasonable and vexatious delay of payment." [statref]815 ILCS 205/2 (West 2014)[/statref].

Creditors can receive prejudgment interest on moneys due based on an "instrument of writing." [statref]815 ILCS […]