Watkinson v. Root ( 1829 )

By the Court:

An agreement, after interest is due, to turn it into principal, is valid. 4 Term, 612; 2 H. Bl. 144.

*It is, however, understood that in England, at least until recently, an agreement, at the time of an original contract, that if interest be not paid at the end of the year it shall be deemed principal, and carry interest, will not be enforced. 1 Johns. Ch., and cases cited. This is claimed to be a rule of policy, and it is supposed that a contrary rule would tend to oppression, hard dealing, and other evils. We deem it unnecessary to inquire into the correctness of this policy, although the current opinions of modern political economists render it at least doubtful.

Such a contract as the present is prohibited by no statutory provisions, and we see no reason why it should not be enforced. 'The decision of a respectable court is found (Adams, N. H. 179) where interest upon interest was allowed, in a case similar to the present, and we are willing to follow the precedent, ^(a)

(a) An action will lie to recover interest. .2 Mass. 613; 3 Mass. 221 Where money is payable on demand, interest is not recoverable until demand made. 4 Bibb, 246; 2 Bibb, 471.