Topic 2.5: Methods of Payment (B) Flashcards
What is a ‘Thing in Action’?
Something you can’t physically touch yet enjoy the benefits of (e.g. $1000 debt allows creditor the right to sue)
What are the essentials of payment?
1) The parties (Usually 2 but can be more)
2) A money obligation, not service
3) Debtor needs to make payment, payment from a TP will still count (Owen v Tate)
4) Form of payment that has been agreed is only payment accepted (Re Charge Card Services)
5) Coinage Act 1971 (Maximum amount of payment in any denomination)
What are the two main forms of payment?
1) Physical Money
2) Electronic Money (e.g. funds transfer or electronic payments)
Explain the characteristics of Physical Money
1) Physical chattel that is physically possessed
2) Cannot be bought or exchanged
3) Negotiable as title can be passed (Miller v Race)
4) Fungible as each note is unique
Explain the characteristics of Bank/Electronic Money
1) Bank money is the money reflected in a bank account
2) E-money is money that is backed up by an issuer (e.g. visa or mastercard)
3) Bank money has ONLY been transferred once you can use it, not once it is in the bank account (Tayeb v HSBC)
4) Bank has proprietary right to the money in the bank account, you have contractual right (Personal relationship as said in Foskett v McKeown)
What are some of the alternative payment options? Explain them
1) Set-off (Mutual debt between two people and find what is actually owed) (e.g. A owes 10p to B and B owes 30p to A, so to Set-off means that B just owes A 20p)
2) Part-exchange (Barter system) (i.e. using item and money to pay off debt) (Like 20p and a rolls royce for 200,000 debt)
3) Novation (Moving debt from contract to a new contract) (All parties must consent to the novation)
4) Assignment (Transfers ‘good stuff’ in the contract, not the obligations) (Not all parties must agree)
What are Bills of Exchange?
1) Substitutes for cash
2) A negotiable instrument
3) Bill of Exchange Act 1882 s3 (What is a BoE?)
What are the characteristics of a Bill of Exchange?
1) Negotiable as legal title and proprietary rights can be transferred
2) BoE should be treated as cash (Banque Cantonale de Geneve v Sanomi
Is a cheque a BoE?
Yes; crossed cheques also exist which specify how it has to be redeemed
Difference between order and bearer bills of exchange?
Order bill = Seller/payee is mentioned and can take payment or transfer it
Bearer bill = Seller/payee is NOT mentioned and anybody who holds the bill can redeem it
How does negotiability work with BoEs?
1) If one transfers title to another, the receiving party will attain good title
2) Transferability must exist for negotiability to exist
3) Non-negotiable items can still be transferred
4) Negotiable means that whoever is transferred a BoE will have the BEST title
What if the name on a BoE is written wrong?
This BoE (fictitious order bill) will be treated as a bearer bill
