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.
It is only when the parties have failed to apply a payment that the law will make such application.1 If neither party is shown to have made an appropriation of a payment, the law will make such appropriation.2 The general principle which governs appropriation of payments by the law is said to be that the law will apply such payments as justice dictates and as the parties would probably have intended.3 Rules so vague and general are of little practical aid.4 Certain concrete rules have been worked out, however, as guides in ascertaining the intention of the parties; and these rules are applied by the courts with substantial unanimity. The law will apply a payment to an undisputed claim in preference to a disputed one,5 and to an overdue claim in preference to one incurred after such payment,6 and to the valid part of a debt in preference to .the void part.7 Payment to a building and loan association by a borrowing member is to be applied to his liability for the stock and not upon his loan.8
North Carolina. Moss v. Adams, 39 N. Car. (4 Ired. Eq.) 42.
Vermont. Pierce v. Knight, 31 Vt. • 701 (obiter).
5 England. Cory v. The Mecca , A. C. 280; Seymour v. Pickett [1905J, 1 K. B. 715.
Alabama. Pearce v. Walker, 103 Ala. 250, 15 So. 568.
New York. California Bank v. Webb, 94 N. Y. 407.
South Carolina. Baum v. Trantham, 42 S. Car. 104, 40 Am. St. Rep. 697, 19 S. E. 973; Heilbron v. Bissell, Bailey Eq. (S. Car.) 430.
6Pattison v. Hull, 9 Cow. (N. Y.) 747; Harker v. Conrad, 12 S. & R. (Pa.) 301, 14 Am. Dec. 691.
7Dawe v. Holdsworth, Peake N. P. 64; Devaynes v. Noble (Clayton's Case), 1 Meriv. 572.
See also, Megatt v. Mills, 1 Ld. Raym. 287, where a payment was applied to an earlier debt incurred in trade so as to avoid the consequence of involuntary bankruptcy.
8 See discussion in Cory v. The Mecca , A. C. 286.
1 Kann v. Kann, 259 Pa. St. 583, 103 Atl. 369.
2 United States. United States v. Kirkpatrick, 22 U. S. (9 Wheat.) 720, 6 L. ed. 199; In re American Paper Co., 255 Fed. 121.
North Dakota. Langton v. Kopa, - N. D. - , 171 N. W. 334.
Pennsylvania. Kann v. Kann, 259 Pa. St. 583, 103 Atl. 369.
Washington. Bishop v. T. Ryan Construction Co., - Wash. - ,180 Pac. 126.
West Virginia. Wait v. Homestead Building Association, 81 W. Va. 702, 95 S. E. 203.
Wyoming. King v. Beaumier, - Wyom. - , 174 Pac. 612.
3 Arkansas. Price v. Dowdy, 34 Ark. 285
California. Murdock v. Clarke, 88 Cal. 384, 26 Pac. 601; London ft San Francisco Bank v. Parrott, 125 Cal. 472, 73 Am. St. Rep. 64, 58 Pac. 164.