LEGAL PRINCIPLE: BANKING LAW — Interest — Clause Permitting Bank to Stipulate Rate — Compound Interest Permitted
PRINCIPLE STATEMENT
A clear and unambiguous clause in a mortgage agreement permitting the bank to stipulate the rate of interest includes the power to charge compound interest. There is no necessity to import additional words requiring prior consultation or notice.
RATIO DECIDENDI (SOURCE)
Per Ejiwunmi, JSC, in Owoniboys Tech. Services Ltd v. Union Bank of Nig. Ltd (2003) NLC-1681999(SC) at p. 20; Paras D–E.
"The provision of clause 3 of the mortgage agreements is clear and unambiguous. It is possible to understand and apply it as it stands. There was, therefore, no necessity to import new or additional words into it to require prior consultation with, or the giving of prior notice of increase in rates of interest on the loan in question to the respondent."
EXPLANATION / SCOPE
A clear interest clause includes the power to charge compound interest. The principle applies to banking law. The court will not add words to a clear clause. The rule respects contractual terms. The borrower is bound by the agreement. The principle is well-established.
