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.

XREF: Links to contract damages theory and the efficient breach discussion; the Diamond Dealers Club fiduciary regime is flagged as modifying this typical outcome.

Lisa Bernestein, Opting out of the Legal Sys…, loc. 152