Putnam's Handy Law Book for the Layman

Payment. - In making payment the parties to an agreement always have in mind cash, unless they otherwise agree. Not every kind of money can be used, nor only in limited amounts. Thus, if one owed another a thousand dollars he could not deliver to him, unless he were willing to accept them, one thousand silver dollar pieces, but only ten of them. Nor can a debtor compel his creditor [212]to receive one cent and five cent pieces to a greater amount than twenty-five cents. National bank notes may be paid or tendered to the government, and by one bank to another, yet they may be refused by an individual in payment of his debt. It is important, when one owes another and there is a dispute over the amount, that the debtor should tender or offer to pay his creditor the proper kind of money, because should he offer him some other kind, national bank notes for example instead of United States notes, or those issued by the federal reserve bank, and he declined to take them and should afterwards sue his debtor for the amount, the latter's offer to pay in national bank notes would be regarded as no payment, or even offer of payment.

A note or check given for a bill of goods is not payment. In everyday affairs a check is thus given and received, in fact it is only a payment conditioned on payment of the check. Consequently if it is not paid, the creditor can sue to recover on the check, or for the original goods as he might elect. In most cases he would ignore the check and sue for the original bill. Suppose some one had endorsed the maker's check, then the creditor would probably sue on that in order to hold both parties.

Does a debtor who turns over a note to his creditor in payment, thereby cancel the debt? If he does not, of course the creditor can still sue the debtor; but if he turned the note over in actual payment, then his right to sue his debtor is gone. What was the intention of the two parties? This is a question of fact to be ascertained like any other.

How shall the money be applied of one who owes several debts to the same person and makes a general payment? The debtor can make the [213]application, if he does not, the creditor can do so; if neither does this, then the law applies it, first to the payment of interest that may be due on any of the debts, and the balance left, should there be any, to the payment of the principal. Of several debts the law applies it to the oldest debt. Again, if there is a surety for any of the debts, he may insist on the application of the money in order to be relieved.

If a depositor in a bank has made a note payable there this is regarded very much like a check, it is a direction to the bank to pay it, especially by the Negotiable Instruments law. Unless the maker of a note is insolvent, a bank can never pay the unmatured note of a depositor. Nor can a bank apply a deposit, which is known to be trust money, or belonging to another person than the depositor to the payment of his note. Generally a bank declines to pay a note that is overdue though there is no law, except in a few states, against paying it should the bank decide to do so. In all cases a depositor may make any application of his deposit he desires, for it is his own and the bank cannot divert it in any way against his direction.

A receipt taken in payment of a debt is not conclusive evidence of payment and may be contradicted by other evidence, though it is regarded on its face as payment. When received, a receipt should be kept for at least six years, because it is such strong evidence of payment. After that period the statutes of limitation in most states have the effect of canceling a debt, on the theory or presumption that it has been paid. If the debtor afterward promises to pay, his new promise is valid though there is no consideration therefor, and he is legally required to pay the debt.

Should a receipt also contain any other statement [214]or contract beside the payment of money, this would have the same effect as any other contract between the parties, and would be equally binding on them.

The effect of a seal after the receiptor's name may be explained in this connection. A sued B and C for a debt. Before trial he gave C a receipt stating that if he did not recover from B he would nevertheless not hold C liable. Having failed in his suit against B, he sought to hold C notwithstanding his receipt releasing him. And he succeeded for the reason that his release was given without consideration and therefore was worthless. Had A added after his name a seal this would have imported or implied a consideration and the receipt would have been an effective release.

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