Interest as Damages in California
![handle is hein.journals/uclalr5 and id is 264 raw text is: INTEREST AS DAMAGES IN CALIFORNIA
One element of damages in a civil action may be interest upon the
principal damages calculated from the time of the accrual of the cause of
action to the date of the verdict. This award may represent a substantial
portion of the total judgment, yet an examination of the California cases
reveals that frequently attorneys and courts relegate an interest claim to
a position of insignificance compared to the main issues in litigation.
Such a course is understandable, but the resulting case law emerges as
a patchwork of decisions which poorly define the applicable rules. The
purpose of this comment is to direct attention to some of the problems
which have not been answered by the courts, and at the same time to
suggest an integrated interpretation of the two basic provisions of the
California statutory structure in the area of interest damages. Consideration
will be given only to that interest which is awarded by operation of law
as an element of damages rather than that which is payable by the terms
of an agreement between the parties.'
THEORY OF INTEREST AS DAMAGES
Throughout the development of the law of interest damages, the courts
have seldom expressed with any degree of clarity the reasons for awarding
such damages in the absence of an agreement to pay interest. The under-
lying purpose of damages in general is compensation to the plaintiff
for the loss or harm he has sustained because of the defendant's act.2
But it is a difficult matter to determine the harm caused by the failure
to receive a previously withheld sum of money until the date of the
verdict. When, in the development of legal and economic thought, interest
was recognized to be the natural growth of the money3 the courts
seized upon interest as a convenient and definite method of measuring this
loss.4 The person deprived of the use of his money is at least denied
the opportunity of investing it and receiving the going rate. The legal
rate of interest' affords a quick approximation of the possible return and
has generally been used by the courts in California and other jurisdictions.
1 Interest which is payable by the terms of a contract is denominated conventional
interest. McCORMICK, DAMAGES § 50 (1935), hereinafter cited as MCCORMICK.
2 CAL. CiV. CODE §§ 3300, 3333; MCCORMICK § 1. For a discussion of other reasons
for allowing interest as damages, see Laycock v. Parker, 103 Wis. 161, 79 N.W.
327 (1899).
3 1 SEDGWICK, DAMAGES § 292 (9th ed. 1912), hereinafter cited as SEIGWICK.
4 The court is committed to the general doctrine of giving that measure which more
nearly affords compensation to the plaintiff .... The interest rate, whether as con-
tracted for by the parties or the legal rate, is the most definite standard which can
be furnished a jury. GREEN, RATIONALE OF PROXIMATE CAUSE 191 (1927).
5 The legal rate in California is 7%. CAL. CONST. art. XX, § 22 (1952) ; CAL. GEN.
LAWS act 3757, § 1 (1954). See text at note 65 infra.
[ 262 ]](ViewImageLocal?handle=hein.journals/uclalr5&div=19&collection=&method=preview&ext=.png&size=3)
What Is HeinOnline?
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most
Interest as Damages in California
Contact us for annual subscription options:
Already a HeinOnline Subscriber?
profiles profiles most