This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
As to the time at which the creditor may exercise his right of making application of payments there is a divergence of authority. The Common Law ruje allows the creditor to make such application at any time before the controversy between debtor and creditor has arisen,1 or as some authorities state the rule, at any time before the suit has been commenced.2 Other authorities apply this rule even more liberally in favor of the creditor and allow him to make such application at any time before the court makes the application.3 The Civil Law rule, on the other hand, requires the creditor to make the application when payment is made, or, at least, as some authorities hold, within a reasonable time after payment has been made; and this rule is followed in some American states.4 Whatever rule is enforced, an application when once made is a finality,5 and can be changed afterwards only by the consent of the parties. Thus A was indebted to B on a note and subsequently they had open mutual accounts, A furnishing produce which B sold. B applied the price of such produce to the open account. After B's death his administrator was not allowed to change the application of such payments to the note, leaving the open account barred by the statute of limitations.6 However a credit on a specific note, without the knowledge of the debtor has been held not to be an irrevocable application.7 .
22 Byrnes v. Claffey, 69 Cal. 120; 10 Pac. 321; Heintz v. Cahn. 29 111. 308; Bacon v. Brown, 1 Bibb. (Ivy.) 334; 4 Am. Dec. 640.
23 Niagara Bank v. Rosevelt. 9 Cow. (N. Y.) 409; Donally v. Wilson. 5 Leigh (Va.) 329.
1 Sleet v. Sleet, 109 La. 302; 33 So. 322: Slaughter v. Milling. 15 La. Ann. 526; Dorsey v. Gassaway, 2H. & J. (Md.) 402; 3 Am. Dec. 557; Neal v. Allisor. 50 Miss. 175.
1 United States v. Kirkpatrick. 9 Wheat. (U. S.) 720: Applegate v. Koons. 74 Ind. 247: Burt v. Bnt-terworth. 10 R. I. 127: 32 Atl. 167; Norris v. Beaty. G W. Va. 477.
2 Cory v. The Mecca (1897). A. C. 286: Haynes v. Waite. 14 Cal. 446; Richards v. Columbia. 55 N. H. 96; Moss v. Adams, 4 Ired. Eq. (N. C.) 42.
3 Pearce v. Walker. 103 Ala. 250; 15. So. 568: California Bark v. Webb. 94 N. Y. 467; Baum v. Tran-tham. 42 S. C. 104; 46 Am. St. Pep. 697: 10 S. E. 973; Heilbron v. Bis-sell. Bailey Eq. (S. C.) 430.
4 Pattison v. Hull. 0 Cow. (N. Y.) 747: Barker v. Conrad. 12 S. & R. (Pa.) 301: 14 Am. Dec. 601.
5 Hanlv v. Potts. 52 W. Va. 263; 43 S. E. 218.