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.
If something other than money is delivered by the debtor to the creditor it is possible that it may be delivered as absolute payment, or as collateral security, or as conditional payment. If there is an agreement that it is taken as payment, it has such effect.1 By express agreement between the parties a note may be taken as payment of an obligation;2 and by such agreement the note of a third person may be accepted as payment.3 If a note of the maker is taken as payment by agreement between the debtor and the creditor, the effect of such payment is not altered by the fact that the note is made payable to the maker's order and that it is not endorsed by the maker to the creditor, so that it is not negotiable.4 By agreement between the parties a draft or order,1 or a check,6 may be accepted as payment in the absence of some rale of positive law requiring payment in money. Under the statutes in force in some jurisdictions, certain classes of debts,7 such as a debt to a corporation for stock which is issued by such corporation,8 can not be paid by the note of the debtor. By agreement between the debtor and the creditor, mutual claims held by each against the other may be regarded as extinguished; and under such agreement the claim which is thus extinguished by agreement is regarded as paid.9
1 United States. A. Leschen & Sons Rope Co. v. Mayflower Gold Min. & R. Co., 173 Fed. 855, 35 L. R. A. (N.S.) 1.
Colorado. Bartholomew v. Emersoh-Brantingham Implement Co., - Colo. - , 187 Pac. 538.
Indiana. Roberts v. Vonnegut, 58 Ind. App. 142, 104 N. E. 321.
Iowa. Untcrharnscheidt v. Missouri State Life Ins. Co., 160 la. 223, 45 L. R. A. (N.S.) 743, 138 N. W. 450.
Oklahoma. Mutual Life Ins. Co. v. Chattanooga Sav. Bank, 47 Okla. 748, L. R. A. 1016A, 000, 150 Pac. 100.
West Virginia. Garrett v. Patton, 81 W. Va. 771, 95 S. E. 437.
"It may also be mentioned in this connection that while payment ordinarily means in money and he to whom it is due may insist that nothing else is payment, yet 'the payment of a debt need not necessarily be in money, but anything of value which the parties agree shall be accepted or go in payment of a debt will be treated accordingly. Thus it is that a check or the note of a third person will, when so expressly agreed, be treated as payment or satisfaction of a debt.'" Mc-Cormick v. Obanion, 1C8 Mo. App. 606, 153 S. W. 267.
County warrants and promissory notes may be taken as payment. Pase-walk v. Bollman, 20 Neb. 510, 26 Am. St. Rep. 300. 45 N. W. 780.
2 United States. Sheehy v. Mande-ville, 10 U. S. (6 Crunch) 253, 3 L. ed. 215.
Colorado. Bartholomew v. Emerson-Brantingham Implement Co., - Colo. - , 187 Pac. 538.
Idaho. Fidelity State Bank v. Miller, 29 Ida. 777, 162 Pac. 244.
Iowa. Dille v. White, 132 la. 327, 109 N. W. 909.
New York. Meyer v. Lathrop, 73 N. V. 315.
Ohio. Athens First National Bank v. Greene, 40 O. S. 431.
South Dakota. Grissel v. Woon-socket Bank, 12 S. D. 93, 80 N. W. 161.
West Virginia. Plumley v. First Nat. Bank, 76 W. Va. 635, 87 S. E. 04.
3 Bartholomew v. Emerson-Branting-ham Implement Co., - Colo. - , 187 Pac. 538; Burlington Gaslight Co. v. Greene, 22 la. 508; Grubbe v. Pierce, 156 Wis. 20, 145 N. W. 207.
Note of one of joint debtors. Sheehy v. Mandevillc, 10 U. S. (6 Cranch) 253, 3 L. ed. 215.
4 Unterharnscheidt v. Missouri State Life Ins. Co., 160 la. 223, 45 L. R. A. (N.S.) 743, 138 N. W. 459.
5 Wilton v. Weston, 48 Conn. 325; Mutual Ins. Co. v. Chattanooga Sav. Bank, 47 Okla. 748, L. R. A. 1916A, 669,
On the other hand, it may be understood between the parties that whatever has been delivered is not intended as payment, but as collateral security.10
It is a question of fact whether the thing delivered by the debtor to the creditor is delivered as payment or not.11 Where a mortgagor gives his bond for an overdue payment on a mortgage debt,12 or notes of a third person,13 as where the note of a third person is given for an indebtedness under a building contract,14 the question is ultimately one of fact. Railroad coupons secured by first mortgage, which are accepted at par in buying third mortgage bonds at sixty cents on the dollar, the interest on which is guaranteed by a third party, are to be considered as paid.15
150 Pac. 190; Holmes v. Laraway, 64 Vt. 175, 23 Atl. 726; Garrett v..Patton, 81 W. Va. 771, 05 S. E. 437.
6 United States. Tayloe v. Merchants' Fire Ins. Co., 50 U. S. (9 How.) 390, 13 L. ed. 187.
Arkansas. Rose v. Lilly (Ark.), 170 S. W. 483.
Iowa. Rohrbach v. Hammill, 162 la. 131, 143 N. W. 872.
Oklahoma. Bowles v. Biffles, 50 Okla 587,151 Pac. 103.
Virginia. Main Street Bank v. Planters' National Bank, 116 Va. 137, 81 S. E. 24.
Wisconsin. LaFayette County Monument Corporation v. Magoon. 73 Wis. 627, 3 L. R. A. 761, 42 N. W..17.
Check of debtor. LaFayette County Monument Corporation v. Magoon, 73 Wis. 627, 3 L. R. A. 761, 42 N. W. 17.
Check of debtor in hands of bona-fide holder. National Park Bank v. Levy Bros., 17 R. I. 746, 10 L. R. A. 475, 24 Atl. 777.
7 German Mercantile Co. v. Wanner, 25 N. D. 470, 142 N. W. 463.
8 German Mercantile Co. v. Wanner, 25 N. D. 470, 142 N. W. 463.
9 England. Smith v. Winter, 12 C. B. 487.
Iowa. State v. Chambers, 179 la. 436, 161 N. W. 470.
Massachusetts. Hill v. Fuller, 188 Mass. 105, 74 N. E. 361.
New York. In re Rochester, Hor-nellsville & Lackawanna Ry.t 110 N. Y. 110, 17 N. E. 678.
Wisconsin. National Cash Register Co. v. Bonneville, 119 Wis. 222, 96 N. W. 558.
1 0 Granite National Bank v. Fitch, 145 Mass. 567, 1 Am. St. Rep. 484, 14 N. E. 650.
1 1 United States. Layman v. Bank, 53 U. S. (12 now.) 225, 13 L. ed 965; The Kimball, 70 U S (3 Wall.) 37, 18 L. ed. 50.
Massachusetts. Quimby v. Durgin, 148 Mass 104, 1 L. R. A. 514, 19 N. E. 14.
Minnesota. Goodall v. Norton, 88 Minn. 1, 92 N W. 445.
North Carolina. Terry v. Robbins, 128 N. Car. 140, 83 Am. St. Rep. 663, 3S S. E. 470.
Pennsylvania. Shepherd v. Busch, 154 Pa. St. 140, 35 Am St. Rep 815, 26 Atl. 363.
Wisconsin. Rogers-Ruger Co. v. Mc-Cord, 115 Wis. 261, 91 N. W. 685.
1 2 Terry v. Robbins, 128 N Car. 140, 83 Am.. St. Rep. 663, 38 S E 470.