cipal and interest. The article also includes the allowance of interest against a state, county, or municipality, and interest on judgments and decrees and orders of court analogous thereto; but, except for purposes of illustration, the right to and computation of interest as against particular persons or on particular liabilities are left for treatment in the appropriate articles.1 So also the question of the allowance of interest purely as an element of damages, while touched upon in this article, is discussed at length elsewhere. Although an intelligent treatment of the subject in hand necessarily involves the consideration of legal interest, and compound interest, or interest on interest, it is not intended to treat at length matters relating peculiarly to usury or illegal interest, as this constitutes the subject of a special article. The recovery back of interest paid is also considered elsewhere in this work.

2. Definition and Nature.-According to the generally accepted definition, interest is the compensation allowed by law, or fixed by the parties, for the use or forbearance of money, or as damages for its detention. Conventional interest in the ordinary acceptation of the term is such interest as the parties to a contract have agreed upon as a part of their contract, and is as much an integral part of the debt as the principal itself," and while it forms an element in computing the amount of recovery, it does so in the same way that a provision of the contract limiting liability, or any other contractual provision as to the amount involved in the contract, does. Interest by way of damages, or moratory interest as it is sometimes called, is interest allowed in actions for breach of contract or tort as damages for the unlawful detention of the money found to be due. It does

6. Close v. Riddle, 40 Ore. 592, 67 Pac. 932, 91 A. S. R. 580.

1. See for instance, ADVANCEMENTS, Mass. 171, 97 N. E. 1100, Ann. Cas. vol. 1, p. 679 et seq.; ANNUITIES, vol. 1913B 206, 39 L.R.A. (N.S.) 120; 2, p. 10; BANKS, vol. 3, pp. 528, 662, MacRackan v. Bank of Columbus, 164 687; BILLS AND NOTES, vol. 3, pp. 899, N. C. 24, 80 S. E. 184, Ann. Cas. 900, 955, 1048, 1339; CORPORATIONS, 1915D 105, 49 L.R.A. (N.S.) 1043. vol. 7, p. 379 et seq.; COTENANCY, vol. 7, p. 835; COVENANTS, vol. 7, pp. 1165, 1168, 1174; EMINENT DOMAIN, vol. 10, p. 163 et seq.; EXECUTIONS, vol. 10, p. 1398; EXECUTORS AND ADMINISTRATORS, Vol. 11, pp. 147, 203, 377 et seq.; GARNISHMENT, vol. 12, p. 851; GUARDIAN AND WARD, vol. 12, p. 1156; and other specific titles.

2. See DAMAGES, vol. 8, p. 532 et seq.

3. See USURY.

4. See PAYMENT.

5. Brown v. Hiatt, 15 Wall. 177, 21 U. S. (L. ed.) 128; Sullivan v. McMillan, 37 Fla. 134, 19 So. 340, 53 A. S. R. 239; Cochran v. Boston, 211

Note: 91 A. S. R. 731.
And see infra, par. 18.

7. Bennett v. Federal Coal, etc., Co., 70 W. Va. 456, 74 S. E. 418, Ann. Cas. 1913E 578, 40 L.R.A. (N.S.) 588. And see infra, par. 11.

8. Note: 91 A. S. R. 732.

9. Close v. Riddle, 40 Ore. 592, 67 Pac. 932, 91 A. S. R. 580; Bennett v. Federal Coal, etc., Co., 70 W. Va. 456, 74 S. E. 418, Ann. Cas. 1913E 578, 40 L.R.A. (N.S.) 588.

Notes: 6 Am. Dec. 193; 9 A. S. R. 173; 91 A. S. R. 732.

not depend upon any express contractual obligation to pay interest, but upon the theory that the party breaching the contract or committing the tort became bound at the time of the breach to make reparation, and for this delay in making such reparation the injured party is entitled to such interest as will recompense him therefor.10 Interest is recoverable strictly as interest only during the continuance of the contract, and as provided by its terms, before breach, and not after. When the agreement is once violated, the promisee has sustained a wrong for which the law gives him redress by way of damages; and whenever the cases have allowed a plaintiff to recover anything more than the principal sum and the interest up to the time of the breach of the contract, it is solely on account of the default of the party failing; and although in many cases the term "interest" has been used indiscriminately to designate the accession to the principal by the terms of the contract, and also the amount allowed in consequence of the breach of the contract, yet the distinction is perfect in law, and the synonymous use of the expression "interest" with the term "damages" has arisen from the fact that wherever the law regulates the amount of interest, that rate becomes the standard of damages on the breach of all money contracts; the result being the same, it is quite natural that the same name should frequently be employed in both cases.11 Interest in excess of the rate allowed by law is illegal interest or usury.12 Compound interest is interest on interest. 13 Interest reserved from an amount lent at the time of making a loan is a discount.14

3. History. Prior to the reign of Henry VIII the taking of interest or compensation for the use of money was unlawful in England, and contracts for it were deemed usurious, and could not be enforced. 15 It seems to have been held by the church that it was actually sinful as against the laws of God and morality, and by the courts that it was unlawful on the theory of the classical and mediæval economists from the time of Aristotle, that money was only a medium of

10. Note: 91 A. S. R. 732. see infra, par. 4.

And 579, 36 A. S. R. 245, 20 L.R.A. 58; Anderson v. Timberlake, 114 Ala. 377, 22 So. 431, 62 A. S. R. 105. And see BILLS AND NOTES, vol. 3, pp. 977, 1055, 1079 et seq.

11. Mason v. Callender, 2 Minn. 350, 72 Am. Dec. 102; Lash v. Lambert, 15 Minn. 416, 2 Am. Rep. 142; Close v. Riddle, 40 Ore. 592, 67 Pac. 932, 91 A. S. R. 580.

12. See USURY.

15. National Bank of Com. v. Mechanics' Nat. Bank, 94 U. S. 437, 24 U. S. (L. ed.) 176; Pekin v. Reyn

13. Mason v. Callender, 2 Minn. olds, 31 Ill. 529, 83 Am. Dec. 244 and

350, 72 Am. Dec. 102.

Note: 6 Am. Dec. 197.

And see infra, par. 33, et seq. 14. Youngblood V. Birmingham Trust, etc., Co., 95 Ala. 521, 12 So.

note; Mason v. Callender, 2 Minn. 350, 72 Am. Dec. 102; Cherry v. Mann, Cooke (Tenn.) 268, 5 Am. Dec. 696.

Note: 14 Eng. Rul. Cas. 561.

exchange, and naturally barren and unproductive.16 The first English statute upon the subject was that of 37 Hen. VIII, c. 9, which fixed the lawful rate of interest at ten per cent per annum, and visited receiving more with forfeiture and imprisonment.17 The early decisions of the English courts under statutes allowing interest were contradictory and fluctuating, and no stable rule on the subject was laid down prior to that announced by Lord Ellenborough to the effect that interest ought to be allowed only in cases where there was a contract for the payment of money on a certain day, as on bills of exchange, promissory notes, etc., or where there had been an express promise to pay interest; or where from the course of dealing between the parties it might be inferred that this was their intention; or where it could be proved that the money had been used and interest actually made.18 In the absence of these conditions interest was not allowed in an action for money lent or advanced, 19 or for money had and received, or for money paid, or on an account stated for goods sold, even though to be paid for on a particular day, or for work and labor. Thus the law remained in England until the statute of third and fourth William IV, which provided that upon all debts or sums certain, and in actions of trover and trespass de bonis asportatis, and in actions upon policies of insurance, the jury might in their discretion allow interest as part of the recovery.20 Finally an act of Parliament in 1854, 17 & 18 Vict. c. 90, swept all the usury laws in the English statute books out of existence, and established "free trade in money." This change in attitude was the result of long evolution in thought, but so far as credit for it may be given to any one man, it should, perhaps, be ascribed to Bentham, whose writings gave a decided impetus to a public opinion in favor of the mod

16. Mason v. Callender, 2 Minn. 18. Selleck v. French, 1 Conn. 32, 350, 72 Am. Dec. 102; Ex parte Ber- 6 Am. Dec. 185 and note (setting out ger, 193 Mo. 16, 90 S. W. 759, 112 the opinion of Lord Ellenborough in A. S. R. 472, 5 Ann. Cas. 383, 3 De Haviland v. Bowerbank, 1 Campb. L.R.A. (N.S.) 530; Houghton v. Page, 50); White v. Miller, 78 N. Y. 393, 34 2 N. H. 42, 9 Am. Dec. 30; Cherry v. Am. Rep. 544. Mann, Cooke (Tenn.) 268, 5 Am. Dec.

696.

Note: 6 Am. Dec. 188, 189.

17. National Bank of Com. v. Mechanics' Nat. Bank, 94 U. S. 437, 24 U. S. (L. ed.) 176; Mason v. Callender, 2 Minn. 350, 72 Am. Dec. 102; Ex parte Berger, 193 Mo. 16, 90 S. W. 759, 112 A. S. R. 472, 5 Ann. Cas. 383, 3 L.R.A. (N.S.) 530; Cox v. Smith, 1 Nev. 161, 90 Am. Dec. 476.

Notes: 6 Am. Dec. 189; 31 Rep. 498.

Am.

Note: 31 Am. Rep. 498.

19. White v. Miller, 78 N. Y. 393, 34 Am. Rep. 544; Calton v. Bragg, 15 East. 223, 13 Rev. Rep. 451, 14 Eng. Rul. Cas. 540; Cook v. Fowler, L. R. 7 H. L. 27, 43 L. J. Ch. 855, 14 Eng. Rul. Cas. 546 and note.

Note: 6 Am. Dec. 189.

20. White v. Miller, 78 N. Y. 393, 34 Am. Rep. 544; Wilson v. Troy, 135 N. Y. 96, 32 N. E. 44, 31 A. S. R. 817, 18 L.R.A. 449.

Note: 14 Eng. Rul. Cas. 557 et seq.

ern conception of interest.1 From a very early date, the American decisions recognizing that the common law attitude toward interest was impossible in the light of the necessities of modern business and the prevalence of credit adopted a more liberal rule as to its allowance, not only in cases of express or implied contracts for its payment, but as damages for breach of contract, or the violation of some duty.

II. RIGHTS AND LIABILITIES AS TO INTEREST

In General

4. Allowance under Contract or as Damages Generally.-By modern decisions, interest is allowed as compensation for the use of money on the ground of some contract, express or implied, to pay it, or as damages for the breach of some contract, or as damages for the violation of some duty, in all cases where it is possible to assess such damages in a definite and liquidated sum.3 In the light of the conception of interest as a compensation for the use of money, it is obvious that where one has fraudulently obtained money of another, such person is liable for interest thereon. The same rule applies where the money was obtained by extortion or oppression, or by taking undue advantage of another, and interest may be allowed on money exacted from a shipper by a carrier under a discriminatory freight rate. According to the practice in a number of states interest

1. National Bank of Com. v. Mechanics' Nat. Bank, 94 U. S. 437, 24 U. S. (L. ed.) 176.

2. Selleck v. French, 1 Conn. 32, 6 Am. Dec. 185; Sullivan v. McMillan, 37 Fla. 134, 19 So. 340, 53 A. S. R. 239; Houghton v. Page, 2 N. H. 42, 9 Am. Dec. 30; Wilson v. Troy, 135 N. Y. 96, 32 N. E. 44, 31 A. S. R. 817, 18 L.R.A. 449; Dilworth v. Sinderling, 1 Bin. (Pa.) 488, 2 Am. Dec. 469. And see infra, par. 4.

3. Selleck v. French, 1 Conn. 32, 6 Am. Dec. 185 and note (containing an enumeration of the various instances in which interest may properly be allowed); Sullivan v. McMillan, 37 Fla. 134, 19 So. 340, 53 A. S. R. 239; Hammond v. Hannin, 21 Mich. 374, 4 Am. Rep. 490; Mason v. Callender, 2 Minn. 350, 72 Am. Dec. 102; Van Rensselaer v. Jewett, 2 N. Y. 135, 51 Am. Dec. 275 and note; White v. Miller, 78 N. Y. 393, 34 Am. Rep. 544;

Kennon v. Dickins, 1 N. C. 522, 2 Am.
Dec. 642; Dilworth v. Sinderling, 1
Bin. (Pa.) 488, 2 Am. Dec. 469; State
v. Milwaukee, 158 Wis. 564, 149 N.
W. 579, Ann. Cas. 1916A 110 and note.
Note: 35 L.R.A. (N.S.) 220.
And see infra, par. 8.

Generally as to the allowance of interest as damages, see DAMAGES, vol. 8, p. 532 et seq.

4. Lamson v. Beard, 94 Fed. 30, 36 C. C. A. 56, 45 L.R.A. 822; Selleck v. French, 1 Conn. 32, 6 Am. Dec. 185 and note; McShane v. Howard Bank, 73 Md. 135, 20 Atl. 776, 10 L.R.A. 552; Wood v. Robbins, 11 Mass. 504, 6 Am. Dec. 182. And see FRAUD AND DECEIT, vol. 12, p. 458.

5. Bulow v. Goddard, 1 Nott & McC. (S. C.) 45, 9 Am. Dec. 663.

6. Hilton Lumber Co. v. Atlantic Coast Line R. Co., 141 N. C. 171, 53 S. E. 823, 6 L.R.Á.(N.S.) 225. Generally as to measure of damages in

may be allowed on money withheld by an unreasonable and vexatious delay of payment, and under a statute expressly providing for the allowance of interest at a certain rate on money thus withheld, it has been ruled that a person guilty of such delay in making payment of a just claim cannot be relieved by offering to pay interest from the time when the delay began to be unreasonable and vexatious. If he is guilty of such delay he is chargeable with interest on the debt from the time it became due.8 Allowance of interest for the detention of money vexatiously withheld is, however, improper in the absence of express provision therefor in jurisdictions where it is held that interest can be recovered only in the cases enumerated in the statute. While, as a general rule, interest is not allowed on unliquidated demands,10 yet it has frequently been held that interest may be allowed as damages even in the case of unliquidated demands, where the latter are capable of ascertainment by calculation or where they may be determined by reference to well established market values, together with computation.11 Under the statutes of some states interest is now expressly allowed on unliquidated claims from the date of demand, and the institution of a suit is a sufficient demand; 12 and

actions against carriers for discrimination in rates, or to recover excessive charges, see CARRIERS, vol. 4, pp. 655, 862.

7. Chicago v. Tebbetts, 104 U. S. 120, 26 U. S. (L. ed.) 655 (stating this to be the case in Illinois); Geohegan v. Union Elevated R. Co., 266 Ill. 482, 107 N. E. 786, Ann. Cas. 1916B 762; McKinney v. Springer, 3 Ind. 59, 54 Am. Dec. 470; Territory v. Cascade County, 8 Mont. 396, 20 Pac. 809, 7 L.R.A. 105; Bulow v. Goddard, 1 Nott & McC. (S. C.) 45, 9 Am. Dec. 663. And see Winfield Mortg., etc., Co. v. Robinson, 89 Kan. 842, 132 Pac. 979, Ann. Cas. 1915A 451.

8. Chicago v. Tebbetts, 104 U. S. 120, 26 U. S. (L. ed.) 655.

9. Young v. Kimber, 44 Colo. 448, 98 Pac. 1132, 28 L.R.A. (N.S.) 626. And see infra, par. 7.

10. Selleck v. French, 1 Conn. 32, 6 Am. Dec. 185 and note; Murray v. Ware, 1 Bibb (Ky.) 325, 4 Am. Dec. 637; Nicolet v. Insurance Co., 3 La. 366, 23 Am. Dec. 458; Foster v. Dupre, 5 Mart. O. S. (La.) 6, 12 Am. Dec. 466; Hutchinson v. Liverpool, etc., Ins. Co., 153 Mass. 143, 26 N. E. 439, 10

L.R.A. 558; Excelsior Terra Cotta Co. v. Harde, 181 N. Y. 11, 73 N. E. 494, 106 A. S. R. 493 and note; Hunt v. Jucks, 2 N. C. 173, 1 Am. Dec. 555; Pengra v. Wheeler, 24 Ore. 532, 34 Pac. 354, 21 L.R.A. 726; McConnico v. Curzen, 2 Call (Va.) 358, 1 Am. Dec. 540. And see DAMAGES, vol. 8, p. 533 et seq.

11. Spalding v. Mason, 161 U. S. 375, 16 S. Ct. 592, 40 U. S. (L. ed.) 738; Leggat v. Gerrick, 35 Mont. 91, 88 Pac. 788, 8 L.R.A. (N.S.) 1238; Van Rensselaer v. Jewett, 2 N. Y. 135, 51 Am. Dec. 275 and note; Excelsior Terra Cotta Co. v. Harde, 181 N. Y. 11; 73 N. E. 494, 106 A. S. R. 493.

Notes: 6 Am. Dec. 195; 28 L.R.A. (N.S.) 1 et seq.

And see DAMAGES, vol. 8, p. 534.

12. Barrow v. Reab, 9 How. 366, 13 U. S. (L. ed.) 177; Trimble v. Kansas City, etc., R. Co., 180 Mo. 574, 79 S. W. 678, 1 Ann. Cas. 363.

Note: 28 L.R.A. (N.S.) 1.
And see infra, par. 25.

In Illinois under the provision of the statute authorizing interest when there has been an unreasonable and vexatious delay of payment, it is held that where property has been wrong