BANKING LAW — Interest on Loans — Proof of Agreed Interest Rate — Requirement of Express Agreement
Ratio Decidendi
Per Muntaka-Coomassie, JSC, in Nkwo Market Community Bank (Nig) Ltd v. Obi (2010) NLC-2802002(SC) at p. 9, para. E – p. 10, para. A:
"The general rule at common law is that interest is not payable on a debt or loan in the absence of express agreement or some course of dealing or custom to that effect. Interest will however be payable where there is an express agreement to that effect and such agreement may be enforced from a course of dealing between the parties or where an obligation to pay interest arises from the custom or usage of a particular trade or business."
Explanation / Scope
This principle establishes that interest is not payable on a loan or debt unless there is an express agreement, a course of dealing, or a custom or usage of trade. The principle applies in banking and loan transactions. It ensures that banks cannot claim interest without proving an agreement. The principle reflects the common law rule that interest must be specifically agreed. It prevents unilateral imposition of interest. The court must require proof of the agreement or custom. The principle provides guidance on the requirements for claiming interest.