1902 Encyclopedia > Payment


PAYMENT, in English law, is one of the modes of performance of an obligation, and consists in the discharge of a sum due in money or the equivalent of money. In order that payment may extinguish the obligation it is necessary that it should be made at a proper time and place, in a proper manner, and by and to a proper person. If the sum due be not paid at the appointed time, the creditor is entitled to sue the debtor at once, in spite of the readiness of the latter to pay at a later date, subject, in the case of bills and notes, to the allowance of days of grace. In the common case of sale of goods for ready money, a right to the goods vests at once upon sale in the purchaser, a right to the price in the seller; but the seller need not part with the goods till payment of the price.

Payment may be made at any time of the day upon which it falls due, except in the case of mercantile contracts, where the creditor is not bound to wait for payment beyond the usual hours of mercantile business. If no place be fixed for payment, the debtor is bound to find, or to use reasonable means to find, the creditor, unless the latter be abroad. Payment must be made in money which is a legal tender (see below), unless the creditor waive his right to payment in money by accepting some other mode of pay-ment, as a negotiable instrument or a transfer of credit. If the payment be by negotiable instrument, the instrument may operate either as an absolute or as a conditional dis-charge. In the ordinary case of payment by cheque the creditor accepts the cheque conditionally upon its being honoured; if it be dishonoured, he is remitted to his original rights. The creditor has a right to payment in full, and is not bound to accept part payment unless by special agreement. Part payment is sufficient to take the debt out of the Statute of Limitations. It is a technical rule of English law that payment of a smaller sum, even though accepted by the creditor in full satisfaction, is no defence to a subsequent action for the debt. The reason of this rule seems to be that there is no consideration for the creditor foregoing his right to full payment. In order that payment of a smaller sum may satisfy the debt, it must be made by a person other than the person originally liable, or at an earlier date, or at another place, or in another manner than the date, place, or manner contracted for. Thus a bill or note may be satisfied by money to a less amount, or a money debt by a bill or note to a less amount; a debt of £6100 cannot be discharged by payment of £90 (unless the creditor execute a release under seal), though it may be discharged by payment of £610 before the day appointed, or by a bill for £610. Payment must in general be made by the debtor or his agent, or by a stranger to the contract with the assent of the debtor. If payment be made by a stranger without the assent of the debtor, it seems uncertain how far English law regards such payment as a satisfaction of the debt. If the debtor ratify the pay-ment, it then undoubtedly becomes a satisfaction. Payment must be made to the creditor or his agent. A bona fide payment to an apparent agent may be good, though he has in fact no authority to receive it. Such payment will usually be good where the authority of the agent has been countermanded without notice to the debtor. The fact of payment may be presumed, as from lapse of time. Thus payment of a testator's debts is generally presumed after twenty years. A written receipt is only presumptive and not conclusive evidence of payment. If payment be made under a mistake of fact, it may be recovered, but it is otherwise if it be made under a mistake of law, for it is a maxim of law that ignorantia legis neminem excusat. Money paid under compulsion of law, even though not due, cannot generally be recovered where there has been no fraud or extortion.

Appropriation of Payments.—Where the creditor has two debts due to him from the same debtor on distinct accounts, the general law as to the appropriation of payments made by the debtor is that the debtor is entitled to apply the payments to such account as he thinks fit. Svlvitur in modum solventis. In default of appropria-tion by the debtor the creditor is entitled to determine the applica-tion of the sums paid, and may appropriate them even to the dis-charge of debts barred by the Statute of Limitations. In default of appropriation by either debtor or creditor, the law implies an appropriation of the earlier payments to the earlier debts.

Payment into and out of Court.—Money is generally paid into court to abide the result of pending litigation, as in interpleader proceedings, or where litigation has already begun, as security for costs or as a defence or partial defence to a claim. Payment into court does not necessarily (except in actions for libel and slander) operate as an admission of liability. Money may sometimes be paid into court where no litigation is pending, as under the Trustee Relief Act, 1847. Payment of money out of court is obtained by the order of the court upon petition or summons or otherwise, or simply on the request or the written authority of the person entitled to it.

Payment of Wages.—By the "Truck Act," 1 and 2 Will. IV. c. 37 (which applies to Great Britain), the payment of wages to most kinds of labourers and workmen otherwise than in coin is prohi-bited. This Act does not apply to domestic or agricultural servants. The provisions of the Act are extended to the hosiery trade by 37 and 38 Vict. c. 48. Payment of wages in public-houses (except in the case of domestic servants) is illegal by the combined effect of 35 and 36 Vict. cc. 76 and 77, and 46 and 47 Vict. c. 31.

Tender. —This is payment duly proffered to a creditor, but rendered abortive by the act of the creditor. In order that a tender may be good in law it must as a rule be made under circumstances which would make it a good payment if accepted. The money tendered must be a legal tender, unless the creditor waive his right to a legal tender, as where he objects to the amount and not the mode of tender. Bank of England notes are legal tender for any sum above £5, except by the bank itself, 3 and 4 Will. IV. c. 98, s. 6. Gold is legal tender to any amount, silver up to 40s., bronze up to Is., 33 and 34 Vict. c. 10. By 29 and 30 Vict. c. 65 the gold coinage of colonial mints may be made legal tender by pro-clamation. Under the powers of this Act the gold coinage of the Sydney mint has been declared to be legal tender. The effect of tender is not to discharge the debt, but to enable the debtor, when sued for the debt, to pay the money into court and to get judgment for the costs of his defence.

Scotland.—The law of Scotland as to payment agrees in most points with that of England. Where a debt is constituted by writ payment cannot be proved by witnesses ; where it is not consti-tuted by writ, payment to the amount of £100 Scots may be proved by witnesses ; beyond that amount it can only be proved by writ or oath of party. The term tender seems to be strictly applied only to a judicial offer of a sum for damages and expenses made by the defender during litigation, not to an offer made by the debtor before litigation. Bank of England notes are not a legal tender in Scot-land, 8 and 9 Vict. c. 38, s. 15, or in Ireland, 8 and 9 Vict. c. 37, s. 6.

United States. —In the United States the law as a rule does not materially differ from English law. In some States, however, money may be recovered, even when it has been paid under a mis-take of law. The question of legal tender has been an important one. In 1862 Congress passed an Act making treasury notes legal tender. After much litigation, the Supreme Court of the United States finally decided in 1870 in favour of the constitutionality of this Act, both as to contracts made before and after it was passed (see 1 Kent's Comm., p. 252). These notes are legal tender for all purposes except duties on imports and interest on the public debt. All gold coins, silver dollars, and silver coins below the value of a dollar coined before 1854 are legal tender to any amount. Silver coins below the value of a dollar of 1854 and subsequent years are legal tender for sums not exceeding five dollars. Silver three-cent pieces of the dates 1851 to 1853 are legal tender for sums not exceed-ing thirty cents, those of subsequent years for sums not exceeding five dollars. Cents are legal tender for sums up to 25 cents. Postage currency is not legal tender for private debts (Bouvier's Law Diet., "Legal Tender"). It falls exclusively within the jurisdiction of Congress to declare paper or copper money a legal tender. By the constitution of the United States, " no State . . . shall make anything but gold and silver coin a tender in payment of debts " (art. i. s. 10).

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