RECOVERY OF INTEREST

Abstract

It is noted that the modern institution of interest is deeply rooted in Roman Law,3 where it was a sum “due from a debtor who delayed or defaulted in repayment of a loan. The measure of the [amount] due for the default or delay was … the difference between the [claimant's] current position and what it would have been had the loan been timely and fully repaid.”4 In other words, the measure of interest due for the delay or default was id quod interest.5 In the modern world, interest generally acts as compensation for the loss of use of money.6 Interest is a sum paid or payable as compensation for the temporary withholding of money.7 The rationale for this practice was articulated by the United States Supreme Court in 1896:8 “It is a dictate of natural justice, and the law of every civilized country, that a man is bound in equity, not only to perform his engagements, but also to repair all the damages that accrue naturally from their breach … Every one who contracts to pay money on a certain day knows that, if he fails to fulfil his contract, he must pay the established rate of interest as damages for his non-performance. Hence it may correctly be said that such is the implied contract of the parties.” The following discussion will focus on the topic of interest in the application of CISG. There is good reason for this approach. First, from an economic point of view, interest is far from minor. The importance of this loss must not be understated.9 Second, a review of CISG decisions of the last decades clearly demonstrates that there are very few topics which have been of more than occasional practical importance, and among these, interest is one of the most important. Interest under CISG, is the issue most often treated by both courts and commentators.10