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.
Apart from the difficulty of discharging a formal instrument by any means less formal than the instrument which it is sought to discharge, payment which is a form of performance operates as a discharge of the obligation either in whole or in part; and accordingly a payment of an obligation which is not of record and not under seal, if made by a debtor who is primarily liable thereon, operates as a total or partial discharge, as the case may be.1 A maker of a note who has paid it without having it surrendered to him may maintain an action to secure possession of it.2 If money is delivered by a bank to the holder of a check against the order embodied in such check, the check is paid although it is not stamped "Paid" after it is received by the officers of the bank, and although it is kept in a safe-deposit box.3 Payment may be set up as against a subsequent transferee of an instrument4 unless the instrument is negotiable and the holder thereof is protected as a holder in due course.5 A payment by a debtor who is primarily liable upon the obligation operates as a discharge even if he attempts to take an assignment of the claim instead of making payment of it.6 On the other hand, the payment may be made by one who is secondarily liable on the instrument, and who accordingly is bound to the creditor to make the payment and yet has a right to require payment to be made by the party who is primarily liable. In cases of this sort, payment by a party who is secondarily liable operates as a discharge of the instrument as between himself and the creditor, but as between himself and the primary debtor such payment does not operate as discharge, but rather as a subrogation of the party who made such payment to the rights of the creditor against the debtor who is liable thereon primarily.7 If a party who is liable on an unliquidated claim makes payment thereof, the claim is discharged, and the party who has made such payment can not enforce it as against another party liable thereon, although the party who makes such payment attempts to take an assignment of the claim.8 Payment of an amount due under one contract is not a discharge of the amount due under another contract, although for the same debt.9
1 Kentucky. Fennell v. Fechter, 181 Ky. 101, 203 S. W. 870.
New York. Jefferson County National Bank v. Dewey, 181 N. Y. 98, 73 N. E. 596.
North Carolina. Walter v. Earnhardt, 171 N. Car. 731, L. R. A. 1916E, 536, 88 S. E. 753.
Ohio. People's & Drovers' Bank v. Craig, 63 O. S. 374, 52 L. It. A. 872, 50 N. E. 102.
Virginia. Smith v. Waugh, 84 Va. 806, 6 S. E. 132.
Payment by a joint debtor is a discharge as to all. Green v. Bolster, - Mass. - , 122 N. E. 740.
See, Defense of Payment Under Code Procedure, by Carlos C. Alden, 19 Yale Law Journal, 650.
2 Walter v. Earnhardt, 171 N. Car. 731, L. R. A. 1916E, 536, 88 S. E. 753.
3 State v. Scarlett, 01 N. J. L. 200, 2 A. L. R. 83, 102 Atl. 160.
4 Bank v. Pennsylvania & Kentucky Fire Brick Co.. 175 Ky. 102, L. R. A. 101SE, 105, 104 S. W. 110.
5 See Sec. 2346 et seq.
6 Martin v. Chambers, 214 Fed. 769 (obiter). See to the same effect, People's & Drovers' Bank v. Craig, 63 O. S. 374, 52 L R. A. 872, 59 N. E. 102.
7Louviere v. Laubray, 10 Mod. 36; McCarty v. Roots, 62 U. S. (21 How.) 432, 16 L. ed. 162; Norton v. Downer, 33 Vt. 26.
8 Tanner v. Bowen, 34 Mont. 121, 7 L. R. A. (N.S.) 534, 85 Pac 876.
9 In re Kruger's Estate, - Pa. St. - 107 AtL 379.