Interest damages only fully compensate promisees who can access credit during the dispute.

Evidence

In calculating expectation damages, courts award interest to compensate the promisee for doing without the money during the pendency of the controversy. Interest will fully compensate the promisee only if the unavailability of funds did not affect his ability to enter into subsequent transactions, that is, if the promisee had access to credit on reasonable terms during the relevant time period. The typical diamond dealer does not have ready access to capital markets or excess cash on hand. For example, in a transaction between two non-sight holders, if the promisee is not paid, it is unlikely during the pendency of the dispute that he will be able to either borrow money or obtain access to the implicit capital market at the predispute implicit interest rate. If the amount owed is large, it is quite possible that he will have to suspend operations until he is paid. — Lisa Bernestein, Opting out of the Legal System, 152

Categorization

• XREF: The implicit captial-market assumption inside the law’s remedy doctrine mirrors the stipulation in Game Theory that remedies assume frictionless access; diamond dealers’ liquidity constraints undermine the assumption, echoing the larger argument about why private ordering beats courts here. — connects to: Judicially enforced expectation damages fail to make promisees whole or deter breach. — Lisa Bernestein, Opting out of the Legal System, 149; Interest awards only compensate promisees who had ready credit access during the dispute.

Broader Connections

• Interest awards only compensate promisees who had ready credit access during the dispute. #corroborates (1.00)