Appropriation Under CONTRACT Laws
1. INTRODUCTION:
When a debtor owes several distinct debt to a creditor and makes a payment which is insufficient to the whole debt, the question arises to which debt the payment is to applied. Section 59 to 61 provides the rules which governs the appropriation of payment made by a debtor to the creditors.
2. RULES WHICH GOVERN APPROPRIATION OF PAYMENT:
Following are the rules which govern appropriation of payment.
(I) APPROPRIATION BY DEBTOR:
The first rule which governs the appropriation of payment is laid down in sec. 59. It confers the right of appropriation upon the debtor.
According to this sec.
Where a debtor, owing several distinct debt to one person, makes a payment to him, either with express intimation, or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment If accepted, must be applied accordingly.
=> Application of Rule:
This principle applies to several distinct debt and not to a single debt payable by installments.
=> Example:
A owes to B other debt the sum of 5000. Rupees B writes to A and demands payment of this sum. A sends to B 5000 Rupees. This payment is to be applied to the discharge of the debt of which B had demanded payment.
(II) APPROPRIATION BY CREDITOR:
The second rule is laid down in sec 60. which enables the creditor to make appropriation payment According to this section
"Where the debtor has omitted to intimate, and there are no other circumstances Indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt the payment actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in-force for the time being as to the limitation of suits.
=> Example:
A owes several debt to B. one of them Rs. 2 Lac is time barred. A sends Rs. 4 l.ac to B without Indicating to which debt the amount is to be appropriated. B may appropriate Rs. 2 Lac against the time barred debt.
(III) APPROPRIATION BY LAW:
The third rule is in sec. 61.
When neither party makes any appropriation of payment shall be applied In discharge of the debt in order of time. Whether they are or are not barred by the law in force for the time being as to the limitation of the suit. If the debt are ol equal standing the payment shall be applied in dischrage of each proportionately.
=> Application:
It applies when neither party makes an appropriation. In this situation the law gets the right to appropriate the payment.
=> Example:
A owes two debts of Rs 4 lac each which are time barred and another debt of 8 lac to B. A sends Rs 4 lac. Neither party makes any appropriation of Rs 4 lac would be appropriated rateably against two debt of Rs 4 lac each which are time barred.
3. CONCLUSION:
To conclude I can say that, under contract Act 1872. Sec 59 to 61 provide the rules which governs the appropriation of payment made by a debtor who owns a number of distinct debts to his creditor.
When a debtor owes several distinct debt to a creditor and makes a payment which is insufficient to the whole debt, the question arises to which debt the payment is to applied. Section 59 to 61 provides the rules which governs the appropriation of payment made by a debtor to the creditors.
2. RULES WHICH GOVERN APPROPRIATION OF PAYMENT:
Following are the rules which govern appropriation of payment.
(I) APPROPRIATION BY DEBTOR:
The first rule which governs the appropriation of payment is laid down in sec. 59. It confers the right of appropriation upon the debtor.
According to this sec.
Where a debtor, owing several distinct debt to one person, makes a payment to him, either with express intimation, or under circumstances implying, that the payment is to be applied to the discharge of some particular debt, the payment If accepted, must be applied accordingly.
=> Application of Rule:
This principle applies to several distinct debt and not to a single debt payable by installments.
=> Example:
A owes to B other debt the sum of 5000. Rupees B writes to A and demands payment of this sum. A sends to B 5000 Rupees. This payment is to be applied to the discharge of the debt of which B had demanded payment.
(II) APPROPRIATION BY CREDITOR:
The second rule is laid down in sec 60. which enables the creditor to make appropriation payment According to this section
"Where the debtor has omitted to intimate, and there are no other circumstances Indicating to which debt the payment is to be applied, the creditor may apply it at his discretion to any lawful debt the payment actually due and payable to him from the debtor, whether its recovery is or is not barred by the law in-force for the time being as to the limitation of suits.
=> Example:
A owes several debt to B. one of them Rs. 2 Lac is time barred. A sends Rs. 4 l.ac to B without Indicating to which debt the amount is to be appropriated. B may appropriate Rs. 2 Lac against the time barred debt.
(III) APPROPRIATION BY LAW:
The third rule is in sec. 61.
When neither party makes any appropriation of payment shall be applied In discharge of the debt in order of time. Whether they are or are not barred by the law in force for the time being as to the limitation of the suit. If the debt are ol equal standing the payment shall be applied in dischrage of each proportionately.
=> Application:
It applies when neither party makes an appropriation. In this situation the law gets the right to appropriate the payment.
=> Example:
A owes two debts of Rs 4 lac each which are time barred and another debt of 8 lac to B. A sends Rs 4 lac. Neither party makes any appropriation of Rs 4 lac would be appropriated rateably against two debt of Rs 4 lac each which are time barred.
3. CONCLUSION:
To conclude I can say that, under contract Act 1872. Sec 59 to 61 provide the rules which governs the appropriation of payment made by a debtor who owns a number of distinct debts to his creditor.
