A contract specifying that interest must be “calculated daily” does not mean compounded daily or capitalised daily. Simple interest therefore applies.

In Euro Blitz 21 (Pty) Ltd and Another v Secena Aircraft Investments CC the appeal court found that the words “calculated daily” in a written lease agreement and consequent court order did not mean that interest was to be compounded daily.

If compound interest is not expressly provided for in a written agreement, simple interest is due. The court held that compound interest can only be claimed if: the parties agree to pay compound interest, the obligation to pay interest is alleged in the pleadings and proved by evidence, or if evidence establishes that a universal custom of creditors of the same type (in this case lessors) charging compound interest on arrear rental is uniformly and universally observed in business (leasing) practices in South Africa.