Legal Definitions - damnum et interesse

Damnum et interesse is a term from Scots law that refers to the full extent of loss and damage suffered by a party due to another's failure to perform a legal obligation or contract. It encompasses both the direct, immediate financial harm (the 'damnum' or loss) and the indirect, consequential damages or 'interest' that arise as a result of that failure.

Essentially, it means the total compensation required to put the injured party back into the financial position they would have been in had the obligation been fulfilled, covering both obvious losses and the ripple effects.

• Example 1: Construction Delay

  A homeowner hires a builder to complete a kitchen renovation by a specific date. The builder fails to meet the deadline, causing a two-month delay. The homeowner incurs direct costs such as having to pay for temporary accommodation and eating out for those two extra months (the damnum). Additionally, they had planned to host a significant family event at their home shortly after the original completion date, which they now have to cancel and reschedule at an expensive venue, incurring further costs and inconvenience (the interesse). The builder would be liable for both these categories of loss under the principle of damnum et interesse.

• Example 2: Business Supply Chain Disruption

  A clothing manufacturer contracts with a textile supplier for a large order of a unique fabric, crucial for their new seasonal collection. The supplier breaches the contract by delivering the wrong fabric, which is unusable. The manufacturer suffers immediate losses (damnum) from having to source a replacement fabric at a higher price and paying for expedited shipping. Furthermore, because of the delay in production caused by the supplier's error, the manufacturer misses the peak sales window for their new collection, leading to significantly reduced sales and lost profits (the interesse). The supplier's liability would extend to both the direct costs and the lost business opportunities.

• Example 3: Breach of a Guarantee

  A small business owner secures a loan from a bank, and a friend acts as a guarantor, promising to cover the loan if the business defaults. The business unfortunately fails and cannot repay the loan. The bank's immediate loss (damnum) is the outstanding principal and interest on the loan. However, the bank also incurs additional expenses (interesse) such as legal fees to pursue the guarantor, administrative costs associated with managing the defaulted loan, and the loss of potential earnings from investing the funds elsewhere during the period of default. The guarantor would be responsible for the full scope of these losses under damnum et interesse.