Payment, in law, the discharge of a debt by a delivery of the amount due. The party entitled to receive the money may give notice to him who should pay it, that he requires the payment to be made directly to himself, and then no other payment discharges the debt; but without such notice, payment may be effectually made in the ordinary course of business to the creditor's general agent, or to his attorney. But the agent or attorney must be agent for that purpose. Hence payment to a man's wife, child, servant, clerk, or even attorney or auctioneer, has not the effect of a payment to the party himself, unless this authority to receive the money be shown; but it may be shown indirectly, by usage or other circumstances. Here, however, another general principle of agency comes in; and if the party receiving the money bears to the party paying it all the appearance of agency and authority, and this by the act or consent of the creditor, it is the same thing as if he were actually the agent. So an actual agent can receive payment only according to his authority; thus, if he is authorized to receive payment of a debt in money and receives it in goods or by note, and gives a receipt therefor, the principal is not bound by the receipt. - If there be joint creditors, as if two or more persons deposit money in a bank to their joint credit, a payment to either of them without the consent of the other does not discharge the debt.
The cases of partners, executors, and administrators are exceptions to this rule. In general, payment to a trustee is valid as against any claim of the party having the beneficial interest in the trust, even if he be defrauded by the trustee, unless the person paying be a party to the fraud or consent to it. - Formerly, a payment of a part of a debt was no satisfaction of the whole, even if that were agreed upon; the reason being that the creditor who promised to give up a large debt, all of which was due to him, on the payment of a part only, made the promise without legal consideration. Now, however, it seems to be established that a fair and well understood compromise of a debt, honestly carried into effect, is a complete payment or discharge of the debt. - Payment of money is often made by letter; and some difficult questions have arisen under this mode of payment. The law may be stated thus. If the money reaches the creditor, the debtor is of course discharged. If it does not, he is still discharged if he was directed by the creditor to make the payment in this way, or if he can derive such authority from the certain and unquestionable course or usage of business; but not otherwise.
The same rule or principle would apply if the debtor sent the money, not by mail, but by an expressman, or by a private carrier. - As paper money or bank notes are in universal use in this country, and payment is generally made by them, the law on this subject is of much importance. The questions are: If the notes are forged, where is the loss? If the notes are genuine but the bank is insolvent, where is the loss? As to the first point, if the notes prove to be forgeries, they do not discharge the debt, being considered in law mere nullities. If they are genuine, but not good by reason of the insolvency of the bank, the rules of law are more uncertain. It may be said that generally, and where there is no fraud or negligence on either side, the loss in such cases falls on the party paying, and he must make up the difference between the actual and the nominal value of the notes. This, however, must be so far qualified, as that if the creditor receiving the money, by his subsequent negligence, as by receiving and retaining the notes without any inquiry or notice, prevents the debtor from profiting by any remedy or indemnity he might have had if due notice had been given him, the loss to this extent must fall on the creditor. - Payment is also often made by the debtor drawing his check upon a bank for the amount due, or by his presenting to the creditor some other man's check which he holds.
Now a check is a draft, and, being payable to order or to bearer, is negotiable either by indorsement or by delivery; and it is in most respects embraced within the law of promissory notes and bills of exchange. (See Negotiable Papee.) If the creditor draws the money, then of course payment is made. But if he fails to receive the money, it is no payment, unless this failure be his own fault; for he must not be negligent with it. It need not be presented on the day on which it was received, but it must be presented within a reasonable time thereafter; for if the bank would have paid it when it was drawn, but the check was kept a week, and then the bank failed, the creditor loses the money by this unreasonable delay. What delay is excusable, and what is not, is not settled by any positive rule, but is determined in each case by its own circumstances. If the drawer had no funds in the bank, and no adequate arrangement for funds, when he drew the check, it need not be presented at all in order to bind him, because the drawing of such a check, and using it as payment, was itself a fraud upon the creditor. - Payment is sometimes made by note; and if this be a negotiable note, it may be an absolute payment, discharging the original debt, and leaving the creditor no claim excepting on the note itself.
The law of Massachusetts was quite peculiar in this respect; and as this was the law of Maine when they formed but one state, it continued to be the law of Maine after their separation. At present some part of this peculiarity remains. It may be said, however, to be the law of those two states, that if negotiable paper is given for the amount of a debt, the presumption of law is that it was given and received as payment thereof; but this presumption may be rebutted by proof that the parties did not so understand it. But in England and in all the other states, and in the courts of the United States, the presumption of law is against the note being a payment of the debt, without affirmative proof that it was so understood and intended; but this presumption is changed if the creditor assign the note as his own to a third person. - Payment is sometimes made to a third party, to be held by him until some question is determined or some right ascertained. Such a third party becomes a stakeholder. For the rights and duties of a stakeholder in a case of wager, see Wages. But one may be a stakeholder in other ways.
Thus an auctioneer may receive from a purchaser a sum of money by way of deposit or security, to be kept by him until the title to the property bought can be investigated; and to pay it over to the seller if that be good, or to the purchaser if it be bad. If such a stakeholder pays the money over before the question is determined, he pays it in his own wrong, and at his own peril; for it is his duty simply to hold the money. And it is said that if such stakeholder pays the money to a creditor before his right is determined, the depositor may at once sue him and recover the money without any reference to the state of the question between the creditor and himself. Bat if the deposit be made by check, the stakeholder may draw the money, and hold it or even use it, without making himself liable for the amount. - The law of appropriation of payments is of much importance. It determines the right of applying a payment in one way or in another, or to one debt or to another. The general rule, upon which all others are founded, is, that whoever pays money may direct the appropriation as he pleases; or, in other words, pay it on such account as he chooses.
But if the party paying the money makes no such appropriation, the party receiving it may make such application of it as he pleases; and if neither party makes any specific appropriation, it rests with the law to make it according as the justice and equity of the whole case may require. These rules are held to apply even where the debts are of very different descriptions. Thus, if A owes B $100 on a bond, and as much more on a note, and as much more on simple book account, and pays $100, the appropriation of this payment shall be determined to one or other of these debts, in accordance with the above rules. As the payer may certainly appropriate the money as he will, if he declines doing so, this gives the payee the power of appropriating it at his pleasure, although in a way adverse to the interest of the payer. Thus, if A's wife owed money to B before marriage, and A also owes B, and A pays B a sum of money without specific appropriation, B may apply the money to the debt of A's wife. So, if A owes B two debts, one of which is more than six years old and so is barred, and the other is not, and pays money without appropriation, B may apply it to the debt which A was not legally compellable to pay; but he cannot by such appropriation revive the remainder of the barred debt, and then make B pay the balance.
The appropriation, to have full force, must be made at or very near the time when the money is paid. For if either party at some subsequent period finds out what will be to his advantage, and then undertakes to make such a disposition of it, this will not avail him to the disadvantage of the other; but the law will consider this as a case in which it must make an appropriation because the parties did not. So also an appropriation by either party will not affect the other party unless it be communicated to him. Thus, mere entries in the books of either party do not affect the other party; but if these entries were shown to the other party, then they bind him. And although the payment be general, the creditor cannot make the appropriation, provided the debts due to him are due in different rights. Thus, if A, as executor of C, owes B a debt, and also owes him a private and personal debt, and pays money generally, B must appropriate it first to the payment of the private and personal debt. Nor has the creditor the right of appropriation merely because the debtor did not make an appropriation, if the payment were made in such a way as to prevent the debtor from appropriating it; as on his account by some other person, or in any way which impaired his power of exercising his right. - Where the court makes the appropriation because the parties do not, it will generally favor the creditor so far as to apply it to the most precarious and least secured debt.
But if there be two or more debts, and the sum paid will exactly discharge one of them, the court will consider that it. was intended to pay that debt. If one of the debts is contingent or uncertain, as if B were the surety of A and might be bound to pay a certain sum if A did not, and A also owed B a certain and specific sum, and A pays a sum generally, B will not be permitted to hold it against his own suretyship, but must apply it to the specific debt. On the other hand, a court sometimes protects a surety, and, in his favor, will direct an appropriation of money paid generally; as if A buys goods of B, and 0 is the surety of A, and A pays to B money generally, B will be obliged, in justice to 0, to apply the money to payment for the goods. - Payments are sometimes made by a debtor, not voluntarily, but by compulsion of law, or by his assignees. In such case there is no appropriation by either party, but the payment is applied to all the debts in proportion to their amount.