Time Price Doctrine Law and Legal Definition

Time price doctrine refers to a legal principle that if a debt arises out of a purchase and sale, the usury laws do not apply. Where property is sold on credit, the fact that the difference between the credit price and the cash price exceeds the percentage permitted by the usury laws will not render transaction usurious if the parties acted in good faith. The difference between the prices is deemed compensation to the seller for the risk that the buyer will default and for the interest that the seller could have earned on an immediate payment.

A vendor may fix on his/her property one price for cash and another for credit, and the mere fact that the credit price exceeds the cost price by a greater percentage than is permitted by the usury laws is a matter of concern to the parties but not to the courts, barring evidence of bad faith. If the parties have acted in good faith, such a transaction is not a loan, and not usurious.[ Roper v. Consurve, Inc., 777 F. Supp. 508, 516 (S.D. Miss. 1990)]

The time-price doctrine is based on the central premise that there can be no usury without a loan or forbearance of money and that the sale of property in a time-price transaction involves no loan. The time-price doctrine was judicially created and is not an exception to usury law, but recognizes transactions which are outside the scope of usury law. [Fogie v. THORN Ams., Inc., 95 F.3d 645 (8th Cir. Minn. 1996)]