During the late war, when the rate of profit was high and when the government often borrowed enormous sums, the system of restriction was not adhered to in the negotiation of its loans, the interest upon which was necessarily regulated by the market value of money ; and at all times necessitous borrowers and those who have doubtful or insufficient security to offer to lenders have always found means to evade the statute by granting annuities [Asistri TiEs] and by other means. Except for one or two almost momentary occasions of commercial difficulty or panic, the market rate of interest in this country has not been higher, since the peace in 1815, than the legal rate. • The law does not recognise the charge of interest upon interest, or, as it is called, compound interest ; and yet it is only equitable that where money which is due for interest is not settled, it should be considered a fresh loan, for the use of which interest should be paid. This how ever is a rule so easily evaded by the borrower granting a further acknowledg ment of the interest as though it were prin cipal, that it does not amount to a practical hardship : such new contract, in fact, changes the interest already due into a principal sum. The law also recognises rests in mercantile and banking accounts, in which interest is charged upon a former ascertained balance. Such balance may, and in fact often does, include interest already due ; and thus the creditor really receives interest upon interest, or com pound interest.
Debts do not always carry even simple interest from the time when the money becomes due to the creditor: in such case payment of interest is rather the excep tion than the rule. Unless the debt be such a debt as carries interest by the cus tom of merchants or traders, or unless there is an express agreement to such effect between the parties, or unless such agreement can be inferred from their course of dealing, or unless there are some very special circumstances, debts do not carry Interest from the time when due.
But now, by 3 & 4 Will. IV. c. 42, a jury may, if they think fit, upon all debts or sums certain, allow interest to the creditor, at a rate not exceeding the cur rent rate of interest, from the time when such debts or sums were payable, if pay able by virtue of a written instrument at a certain time ; or if payable otherwise, then from the time of a demand of pay ment in writing, so as such demand give notice that interest will be claimed from the date of such demand. This statute also empowers juries to give damages, in the nature of interest, in respect of the detention or appropriation of goods. By 1 & 2 Vict. c. 110, all judgment-debts are to carry interest at the rate of 4 per cent. per ann. from the time of entering up the judgment. As to interest of money lent on ships or their cargo, see Borromny, and on legacies, see LEGACY.
The relaxation above mentioned as having been made as to the rate of interest formed part of the arrangement made in 1833, at the renewal of the charter of the Bank of England. (3 & 4 Wm. IV. c. 98.) It consisted in excepting from the opera tion of the statute all bills of exchange and promissory notes not having more than three months to run previous to their maturity ; these might be discounted at any rate of interest agreed upon with the holder. More recently, by the act 1 Victoria, c. 80 (July, 1837), this relaxa tion was extended to all such mercantile instruments which have not twelve months to run before they are due.
USUS. [Useeauceers.]