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.
It has been suggested that a distinction should be made between cases in which there is an express covenant for the payment of interest, and cases in which there is no express covenant to pay interest, and interest is merely allowed as damages for non-payment. Since the same reasons which forbid a debtor to pay his debt in one case, forbid him to pay it in the other, the same protection should be accorded in one case as in the other. Even if the debtor has entered into an express covenant to pay interest, such covenant can not be performed by reason of the war. As a matter of fact, the cases in which it has been suggested that interest is not suspended because of an express covenant to pay interest, are cases in which such suggestion was an obiter, as the fact that the debtor could have paid his debt to a resident agent or to a resident creditor, was the real reason for holding that interest was not suspended.1 Where the only ground for contending that an express covenant to pay interest prevents the application of the rule suspending interest during war on debts due to alien enemies, it has been held that the fact that the contract by which a debt is incurred contains an express covenant for the payment of interest, does not prevent the existence of war between the country of which the creditor is a resident and citizen, and the country of which the debtor is a resident and citizen, from suspending interest.2
7 Brown v. Hiatt, 82 U. S. (15 Wall.) 177, 21 L. ed. 128.
1 The cases in which this distinction is suggested are cases in which the question was not involved, as the principal could have been paid lawfully. See Yeaton v. Berney, 62 III. 61, and Neilson v. Rutledge, 1 Desauss. Eq. (S. Car.) 194.
2 Brown v. Hiatt, 82 U. S. (15 Wall.) 177, 21 L. ed. 128.
"The counsel for the complainant attempts to draw a distinction between those contracts in which interest is stipulated and those to which the law allows interest, and contends that the revival of the debt in the first after the termination of the war, carries the interest as part of the debt; while in the latter case interest is allowed only as damages for the detention of the money. We are, however, of opinion that the stipulation for interest does not change the principle, which suspends its running during war. In the first case cited, from Pennsylvania, interest was stipulated in the contract. 'A prohibition,' says Mr. Justice Washington, in Conn v. Penn (Pet. Cir. Ct 524), 'of all intercourse with an enemy during the war, and the legal consequence resulting therefrom, as it respects debtors on either side, furnish a sound, if not in all respects a just, reason for the abatement of interest until the return of peace. As a general rule it may be safely laid down that wherever the law prohibits the payment of the principal, interest during the existence of the prohibition is not demandable' " Brown v. Hiatt, 82 U. S. (15 Wall) 177, 21 L. ed. 128.