This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
Whether the rule that war suspends interest is modified in any way by the date of the maturity of the obligation, is a question upon which there has been some divergence of authority. If the debt is due before the war begins, the commencement of the war renders the payment of the debt legally impossible, and it is held that interest does not run during the period of the war,1 even though under the rules in force the creditor was not allowed to bring an action until a certain period after maturity and though war had broken out before the creditor could have brought such action.2 Since the reason for the rule that interest is suspended during the war is that the debtor can not pay such debt if he complies with the law, and since it is not intended to impose a penalty upon the creditor, as is shown by the cases in which interest is not suspended wherever the debtor could have paid the debt in compliance with the law,3 the rule that the outbreak of war stops interest upon debts due to alien enemies is correct, even though the alien enemy would not have been permitted to sue before the outbreak of the war.
3 Blake v. Quash, 3 M'Cord L. (S. Gar.) 340.
4 Fred v. Dixon, 68 Va. (27 Gratt.) 641.
5 Shortridge v. Mason, 01 N. Car. (U. S., C. C.) 31)2, Chase 136, 1 Abl. (U. S.) 68, Fed Cas. No. 12812.
6 Hoare v. Allen, 2 U. 8. (2 Dall.) 102, 1 L. ed. 307; Foxcraft v. Nagle, 2 U. S. (2 Dall.) 132, 1 L. ed. 319.
7 Neilson v. Rutledge, 1 Desauss. Eq. (S. Car.) 194.
8 Neilson v. Rutledge, 1 Desauss. Eq. (S. Car.) 194.
9 Hutchinson v. Landcraft, 4 W. Va. 312.
At the other extreme of cases of this class, the debt may, by its terms, not be due until after the war, and while the debtor may not be permitted to pay the instalments of interest as they come due, he would have had no legal right in time of peace to have paid the debt at any time and stopped interest. In such a case, war should not suspend interest, and there is some authority for this view.4 Where the debt is not due until after the war, the fact that interest is payable semi-annually docs not cause a suspension of interest upon the principal during the war,5 although it might suspend the payment of interest upon the overdue instalments of interest.
The intervening case is the case in which the debt falls due during the war. A logical application of the foregoing principles would result in the rule that interest was not suspended until the maturity of the debt, since the debtor had no legal right even in time of peace to pay such debt before maturity and to stop interest thereon. On the other hand, after maturity, interest should be suspended, since the debtor would be prevented by the war from exercising the legal right, since otherwise he would have had to pay the debt and to stop interest. This view, however, has not been taken by the supreme court of the United States.6 If a debt falls due during war and the creditor is a resident and a citizen of the enemy country, it is held that war suspends interest from the outbreak of war to the conclusion thereof, both for the period before maturity and for the period after maturity.7
1 Hoare v. Allen, 2 U. S. (2 Dall.) 102, 1 L. ed. 307.
2 Floare v. Allen, 2 U. S. (2 Dall.) 102, 1 L. ed. 307
3 See Sec. 2740.
4 Lash v. Lambert. 15 Minn. 416, 2 Am. Rep. 142.
5 Lash v. Lambert, 15 Minn. 416, 2 Am. Rep. 142.
6 Brown v. Hiatt, 82 U. S. (15 Wall.) 177, 21 L. ed. 128.