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.
The creditor may even apply payments to debts which for some technical reason are unenforceable, but are on valuable consideration and are not tainted with illegality. Thus he may apply a payment to a debt unenforceable because of non compliance with the Statute of Frauds,1 or the stamp act,2 or a debt barred by the Statute of Limitations,3 or unenforceable because contracted when the debtor was an infant.4
The creditor can not, however, make any application of such payment as will be unfair or unjust to the debtor. He can not apply the payment to a claim which is in dispute in preference to one whose correctness is conceded,5 or to a claim which has been paid before,6 or to an illegal claim instead of a legal one,7 even if such legal and illegal items are in one account,8 as to an usurious contract in preference to a legal one.9 So the creditor can not apply the payment to a debt which can not have been contemplated by the creditor, as to a debt not due when the payment was made,10 or to a debt incurred after such payment was made.11
IHaynes v. Nice, 100 Mass. 327, 1 Am. Rep. 109.
2 Biggs v. Dwight, 1 M. & R. 308.
3 England. Williams v. Griffith, 6 M. A W. 300.
Arkansas. Armistead v. Brooke, 18 Ark. 621.
Massachusetts. Pond v Williams, 67 Mass. (1 Gray) 630; Ramsey v Warner, 97 Mass. 8, 93 Am. Dec 49.
Pennsylvania. Moore v. Kiff, 78 Pa. St. 96.
South Carolina. Hopper v Hopper, 61 S Car. 124, 39 S E. 366.
4Thurlow v. Gilmore, 40 Me 378
5 Perot v. Cooper, 17 Colo 80, 31 Am. St. Rep. 258, 28 Pac. 391; Stones v. Talbot, 4 Wis. 442.
This is sometimes explained on the theory that the debtor impliedly directs such application. Perot v Cooper, 17 Colo. 80, 31 Am. St Rep. 258, 28 Pac. 391.
6 Lyon v. Witters, 65 Vt. 396, 26 Atl. 588.
7 Maine. Phillips v. Moses, 65 Me. 70 (obiter).
Massachusetts. Rohan v. Hanson, 65 Mass (11 Cush ) 44; Bondy v. Hardina, 216 Mass. 44, 102 N. E. 935.
Pennsylvania. Greene v. Tyler, 39 Pa. St. 368.
Vermont. Bancroft v. Dumas, 21 Vt. 456; Backman v Wright, 27 Vt. 187, 65 Am Dec. 187.
8 Dunbar v Garrity, 58 N. H. 575; Storer v. Haskell, 50 Vt 341.
9 North Bend First National Bank v Miltonberger, 33 Neb 847, 51 N. W 232; Adams v. Mahnken, 41 N. J. Eq. 332, 7 Atl. 435; Fay v. Lovejoy, 20 Wis 403
10 Byrnes v Claffey, 69 Cal. 120, 10 Pac 321; Heintz v Cahn, 29 III 308; Bacon v. Brown, 4 Ky (1 Bibb.) 334, 4 Am Dec. 640; Petroutsa v H. C Schrader Co, - Fla, - , 80 So 486.
11Niagara Bank v. Rosevelt, 9 Cow. (N. Y ) 409; Donally v. Wilson, 32 Va. (5 Leigh) 329.