Question

If a transaction includes an interest-bearing account, who holds the legal right to the accrued interest if the contract is silent on the matter?

Accepted Answer

If a contract is silent regarding the allocation of accrued interest, the legal right to that interest belongs to the party who holds legal title to the principal amount at the time the interest is earned. Accrued interest refers to the interest that has accumulated on a financial asset, such as a bank account or bond, since the last interest payment date. Legal title is the formal ownership of property recognized by law. Because interest is legally considered a fruit or product of the underlying principal, it follows the ownership of that principal. For example, if a seller transfers ownership of an interest-bearing account to a buyer on the fifteenth day of the month, the seller is entitled to the interest earned from the first through the fourteenth, while the buyer is entitled to all interest earned from the fifteenth onward. If the contract does not specify a different arrangement, the principle of accession applies, meaning the person who owns the asset at the specific moment the interest accrues becomes the legal owner of that interest.

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If a transaction includes an interest-bearing account, who holds the legal right to the accrued interest if the contract is silent on the matter?

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