[Footnote 1:  Ashley, op. cit., vol. i. pt. i. p. 399.]

[Footnote 2:  Biel, op. cit., iv. 15, 11.]

[Footnote 3:  Cleary, op. cit., p. 93.]

[Footnote 4:  Ibid., p. 95.]

[Footnote 5:  Cleary, op. cit., p. 94.]

[Footnote 6:  Endemann, Studien, vol. i. p. 20.]

[Footnote 7:  ccxl.]

The first thing to be noted on passing from the poena conventionalis to interest proper is that the latter ground of compensation was generally divided into two kinds, damnum emergens and lucrum cessans.  The former included all cases where the lender had incurred an actual loss by reason of his having made the loan; whereas the latter included all cases where the lender, by parting with his money, had lost the opportunity of making a profit.  This distinction was made at least as early as the middle of the thirteenth century, and was always adopted by later writers.[1]

[Footnote 1:  Ashley, op. cit., vol. i. pt. ii. p. 399.]

The title damnum emergens never presented any serious difficulty.  It was recognised by Albertus Magnus,[1] and laid down so clearly by Aquinas that it was not afterwards questioned:  ’A lender may without sin enter an agreement with the borrower for compensation for the loss he incurs of something he ought to have, for this is not to sell the use of money, but to avoid a loss.  It may also happen that the borrower avoids a greater loss than the lender incurs, wherefore the borrower may repay the lender with what he has gained.’[2] The usual example given to illustrate how damnum emergens might arise, was the case of the lender being obliged, on account of the failure of the borrower, to borrow money himself at usury.[3]

[Footnote 1:  Roscher, Geschichte, p. 27.]

[Footnote 2:  II. ii. 78, 2, ad. 1.]

[Footnote 3:  Ashley, op. cit., vol. i. pt. i. p. 400.]

Closely allied to the title of damnum emergens was that of lucrum cessans.  According to some writers, the latter was the only true interest.  Dr. Cleary quotes some thirteenth-century documents in which a clear distinction is made between damnum and interesse;[1] and it seems to have been the common custom in Germany at a later date to distinguish between interesse and schaden.[2] Although the division between these two titles was very indefinite, they did not meet recognition with equal readiness; the title damnum emergens was universally admitted by all authorities; while that of lucrum cessans was but gradually admitted, and hedged round with many limitations.[3]

[Footnote 1:  Op. cit., p. 95.]

[Footnote 2:  Ashley, op. cit., vol. i. pt. ii. p. 401.]

[Footnote 3:  Cleary, op. cit., p. 98; Endemann, Studien, vol. ii. p. 279; Bartolus and Baldus said that damnum emergens and lucrum cessans were divided by a very narrow line, and that it was often difficult to distinguish between them.  They suggested that the terms interesse proximum and interesse remotum would be more satisfactory, but they were not followed by other writers (Endemann, Studien, vol. ii, pp. 269-70).]