Theme 1, Study Unit 1 - The legal nature of payment

Question 1

Define ‘payment’.

Answer 1

Payment is the performance or satisfaction of an obligation, or the delivery of what is due.

S v Harvey case.

Question 2

What are the different forms of payment ?

Answer 2

• Electronic money.
• Mobile money.
• Virtual currencies (e.g., Bitcoin).
• Cash.
• EFTs (Electronic Funds Transfers).
• Payment cards.
• Bills of exchange.

Question 3

When does payment take place ?

Answer 3

• Debtor’s right to use money; payment occurs when the debtor gives the creditor an unfettered, unconditional right to immediately use the money.
• Bilateral Act; payment is a mutual agreement, involving both the debtor’s action and the creditor’s acceptance.
• Creditor Refuses Payment; if the creditor refuses payment, no payment takes place, though this has significant legal consequences. If they later accept the payment, it is retrospectively valid.

Question 4

What is considered as legal tender in South Africa ?

Answer 4

Only coins and banknotes issued by the South African Reserve Bank (SARB).

Question 5

Discuss the meduim of payment.

Answer 5

• Unless otherwise agreed, money debts must be paid using legal tender (banknotes and coins).
• There are specific limits on the amount of certain coins that can be used for payment (e.g., up to R50 with R1, R2, or R5 coins).

Question 6

Discuss payment to and by a third party.

Answer 6

• A third party can make payment on behalf of the debtor, as long as the creditor accepts it.
• The third party must make it clear they are paying on behalf of the debtor, and the payment must be unconditional.
• If the third party pays, they have the right to claim the amount paid from the debtor.
• Adiectus Solvendi Causa is a special type of agreement where the debtor pays a third party that is a creditor of the creditor.

Question 7

What are the rules for time and place of payment ?

Answer 7

• Payment should be made at the time agreed upon by the parties, if not specified, the debtor must pay within a reasonable time.
• Payment should be made at the place agreed by the parties, if no agreement exists, it will follow the law or trade practices.

Question 8

Distinguish between compromise and novation.

Answer 8

• A compromise involves settling an existing dispute, and each party must concede something.
• It differs from novation, where a new contract replaces the old one.

Question 9

What is a set-off ?

Answer 9

• This is a method of extinguishing mutually owed debts by offsetting them against each other.
• It operates automatically (ex lege) under the law.

Question 10

What are the requirements for a set-off ?

Answer 10

• Both parties must owe each other money.
• The debts must be due and enforceable.
• The debts must be of the same kind (i.e., both monetary).

Question 10

What does the appropriation of payments refer to ?

Answer 10

When a debtor makes a partial payment, it may not be clear how the payment should be divided between multiple debts.

Question 11

What are the rules that apply to the appropriation of payments ?

Answer 11

• If there was an agreement on the division, that agreement prevails.
• If no agreement exists, the creditor can decide how to apply the payment, but it must be equitable.
• In the absence of clarity:

1. Pay the most burdensome debt (with the highest interest).
2. If debts are equally onerous, pay the oldest debt.
3. If both debts are equally old, make a proportional payment to each debt.