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 a contract for the payment of money does not specify the time at which such payment is to be made, the ordinary rules of construction apply; and the contract will be construed as though it required payment in a reasonable time.1 If the contract specifies a certain time at which payment is to be made, and payment is not made at such time, such covenant is broken so as to give to the creditor a right of action.2 Whether such breach operates as a discharge depends in part on whether time is of the essence of the contract or not,3 and in part on whether the covenant for such payment is an independent covenant or a dependent covenant, and, if a dependent covenant, whether it is a concurrent covenant or whether it is either a precedent or subsequent covenant.4
1 1 Hale v. Patton, 60 N. Y. 233, 19 Am. Rep. 168.
"If he [the mortgagee] be out of the realm of England, he [the mortgagor] is not hound to seek him, or go out of the realm unto him." Coke on Littleton, 210h.
See contrary (obiter) in Pennsylvania Lumbermen's Mutual Fire Ins. Co. v. Meyer, 197 U. S. 407, 49 L. ed. 810.
1 2 Laura Jane v. Hagen, 29 Tenn. (10 Humph.) 332.
See also, Stansbury v. Embrey, 128 Tenn. 103, 47 L. R. A. (N.S.) 980, 158 S. W. 991.
13 Weyand v. Park Terrace Co., 202 N. Y. 231, 36 L. R. A. (N.S.) 308, 95 N. E. 723.
14 Weyand v. Park Terrace Co., 202 N. Y. 231, 36 L. R. A. (N.S.) 308, 95 N. E. 723.
1 See Sec. 2098.
2 See ch. LXXXIV.
3 See Sec. 2103 et seq.
4 See ch. LXXXIV.
If payment is tendered before the time fixed for payment, the creditor is not bound to accept such payment.5 Since the creditor is entitled to interest for the entire period named in the contract, the offer of the debtor to pay the principal before maturity with interest down to the date of such tender, is one which the creditor may refuse to accept.6 From the nature of the case it is rare that the creditor refuses the debtor's offer to pay before maturity if the debtor offers to pay the amount due with interest down to maturity,7 but if the creditor wishes to refuse such payment, he has the legal right so to do and such offer of payment is without legal effect.8
It has been said, however, that a different rule applies where the creditor has designated a bank as his agent for the purpose of receiving payment. In such case payment by the debtor to the bank before maturity is legally operative, at least if no prejudice is done to the creditor by such premature payment.9 If the bank accepts such payment before maturity and retains the funds until maturity, the fact that the creditor fails to collect such payment from the bank and the fact that the bank finally becomes insolvent while it still has such funds in its hands, does not prevent the payment from being operative.10
5 England. Brown v. Cole, 14 Sim. 427.
Alabama. Caldwell v. Caldwell, 157 Ala. 110, 47 So. 268.
Connecticut. Abbe v. Goodwin, 7 Conn. 377.
Indiana. Bowen v. Julius, 141 Ind. 310, 40 N. E. 700.
Nebraaka. Moore v. Kime, 43 Neb. 617, 61 N. W. 736.
The question was avoided in Moore v. Cord, 14 Wis. 213.
A payment before maturity to the trustee who is named in the mortgage, has no legal effect if he is not given authority to collect such payment and if he is not given possession of the securities. Weldon v. Tollman, 67 Fed. 086.
6 Abbe v. Goodwin, 7 Conn. 377. See also, Graeme v. Adams, 64 Va.
(23 Gratt.) 225, 14 Am. Rep. 130.
7 Pyross v. Fraser, 82 S. Car. 408, 64 S. E. 407.
8 Brown v. Cole, 14 Sim. 427; Quynn v. Whetcroft, 3 Harris & McH. (Md.) 136. (Reversed, but ground of reversal not given.) Pyross v. Fraser, 82 S. Car. 408, 64 S. E. 407.
See also, Smiddy v. Grafton, 163 Cal. 16, 124 Pac. 433.
9 Virginia Exchange Bank v. Cook-man, 1 W. Va. 60.
10 Virginia Exchange Bank v. Cook-man, 1 W. Va. 60.
11 Rosenthal v. Rambo, 165 Ind. 584, 3 L. R. A. (N.S.) 678, 76 N. E. 404.
If a contract of indorsement is entered into in consideration of the agreement of the indorsee to accept payment from the maker before maturity, the indorsee must accept payment from the maker, even before maturity,12 and even if he knows that the maker is then insolvent;13 and if he refuses such payment, he releases the indorsers.