No interest shall be due unless it has been expressly stipulated in writing

REQUISITES FOR RECOVERY OF INTEREST

1.   The payment of interest must be expressly stipulated
2.   The agreement must be in writing
3.   The interest must be lawful
 

EXISTENCE OF STIPULATION TO PAY INTEREST

1.   If a particular rate of interest has been expressly stipulated by  the  parties,  that  interest,  and  not  the  legal  rate  of interest, shall be applied
2.   If the exact rate of interest is not mentioned, the legal rate of 12% shall be payable
3.   No  increase  in  interest  shall  be  due  unless  such  increase has also been expressly stipulated
4.   It is only in contracts of loan, with or without security, that interest may be stipulated and demanded.  
5.   The  receipt  of  the  creditor  of  interest  payment  up  to  a certain  date  of  a  loan  that  has  already  matured  does  not ipso  facto  result  in  the  renewal  or  extension  of  maturity period of the loan up to said date.
6.   Stipulation  of  interest  must  be  mutually  agreed  upon  by the parties  and  may  not be  unilaterally increased by only one  of  the  parties.    This  would  violate  consensuality  and mutuality  of  contract  (PNB  v.  CA).    But  the  parties  can agree  upon  a  formula  for  determining  the  interest  rate,
over  which  neither  party  has  control  (ex:  interest  will  be adjusted quarterly at a rate of 3% plus the prevailing 91-day T-bill rate, etc.).  But if the formula says “interest will be based on T-bill rates and other interest-setting policies as the bank may determine,” this is not valid.  
 

ESCALATION CLAUSE

     Clause  which  authorizes  the  automatic  increase  in  the interest
     An  escalation clause is valid when it  is  accompanied by a De-Escalation Clause.  A de-escalation clause is a clause, which  provides  that  the  rate  of  interest  agreed  upon  will also be automatically reduced.  There must be a specified formula  for  arriving  at  the  adjusted  interest  rate,  over which neither party has any discretion.
 

LIABILITY   FOR   INTEREST   EVEN   IN   THE   ABSENCE   OF STIPULATION

1.   Indemnity for damages—the debtor in delay is liable to pay legal  interest  as  indemnity  for  damages  even  in  the absence of stipulation for the payment of interest
a.    Rate of penalty interest agreed upon
b.   Interest  cannot  be  recovered  upon  unliquidated claims  or  damages  except  when  the  demand  can be established with reasonable certainty

c.    In the absence of express agreement as to the rate of  interest,  CB  Circular  #416  fixes  the  interest  at 12% per annum for loans, forbearance, goods and credits;  and  judgments  involving  such  loans  and
forbearance
d.   Interest as indemnity for damages is payable only in  case  of  default  or  non-performance  of  the
contract
2.   Interest  accruing  from  unpaid  interest—interest  due  shall earn  interest  from  the  time  it  is  judicially  demanded although the obligation may be silent upon this point