Britannica Money (2024)

payment, the performance of an obligation to pay money. A person under such an obligation is called a debtor, and a person to whom the obligation is owed is called a creditor. The obligation may arise in various ways, but it is most commonly the result of a commercial transaction or contract between the parties. In law, in order that payment may extinguish the obligation, it is necessary that it be made at a proper time and place, in a proper manner, and by and to a proper person.

Payment may be made at any time of the day on which it falls due, except in the case of mercantile contracts, where payment must be made during the usual hours of mercantile business. In the absence of any agreement as to the place of payment, it is the duty of the debtor to take reasonable steps to seek out the creditor and to pay the money owed. A debtor is not, without agreement, entitled to any notice or demand from a creditor.

Payment must be made in lawful money, frequently referred to as legal tender. A debtor has no right to demand change. The parties may, however, agree that payment shall be made in some other way—for example, by bill of exchange, by promissory note, by check (all of which are commonly called negotiable instruments), or by electronic funds transfer. Where payment is made by negotiable instrument, the general rule is that the acceptance of such instrument by the creditor operates only as a conditional payment. This means that if the instrument is subsequently dishonoured, the debt revives, and the creditor may sue either on the instrument or on the original debt. The parties may, however, agree that acceptance of a negotiable instrument shall operate as an absolute payment, in which case, if the instrument is dishonoured, the creditor may sue on the instrument but not on the original debt. A payment may be made by the mere transfer of figures in an account without any money changing hands. If goods are accepted in satisfaction of a debt, this constitutes payment.

When a debtor makes payment by post or Internet and the funds are lost without fault on the part of the debtor, the debtor will generally have to bear the loss. Payment may be made by a debtor personally or by a duly authorized agent on the debtor’s behalf. Similarly, payment may be made to the creditor personally or to an agent of the creditor, provided that such agent has authority to receive payment. The general rule is that payment of a debt cannot be enforced after a lapse of six years, but this period varies under different jurisdictions. A common way of proving payment is by the production of a signed receipt, but payment can be proved in other ways, and, conversely, production of a receipt is not conclusive evidence of payment. Money erroneously paid may be recoverable depending on the jurisdiction and whether the payment was made as a mistake of fact or as a mistake of law.