The application of the payment of a sum of money, made by a debtor to his creditor, to one of several debts.

When a voluntary payment is made, the law permits the debtor in the first place, or, if he make no choice, then it allows the creditor to make an appropriation of such payment to either of several debts which are due by the debtor to the creditor. And if neither make an appropriation, then the law makes the application of such payment.

Exceptions to This Rule

This rule does not apply to payments made under compulsory process of law. It will be proper to consider:

  • When the debtor may make the appropriation.
  • When the creditor may make it.
  • When it will be made by law.

In general the appropriation may be made by the debtor, but this must be done by his express declaration, or by circumstances from which his intentions can be inferred. This appropriation, it seems, must be notified to the creditor at the time; for an entry made by the debtor in his own books, is not alone sufficient to determine the application of the payment. In some cases, in consequence of the circumstances, the presumption will be that the payment was made on account of one debt, in preference to another. And in some cases the debtor has no right to make the appropriation, as, for example, to apply a partial payment to the liquidation of the principal, when interest is due.

Cases Where the Creditor May Make an Appropriation

When the debtor has neglected to make an appropriation, the creditor may, in general, make it, but this is subject to some exceptions. If, for example, the debtor owes a debt as executor, and one in his own right, the creditor cannot appropriate a payment to the liquidation of the former, because that may depend on the question of assets.

Though it is not clearly settled in England whether a creditor is bound to make the appropriation immediately, or at a subsequent time yet in the United States, the right to make the application at any time has been recognized, and the creditor is not bound to make an immediate election.

When once made, the appropriation cannot be changed; and, rendering an account, or bringing suit and declaring in a particular way, is evidence of such appropriation. When no application of the payment has been made by either party, the law will appropriate it, in such a way as to do justice and equity to both parties.

Eccl. Law. The setting apart an ecclesiastical benefice, which is the general property of the church, to the perpetual and proper use of some religious house, bishop or college, dean and chapter and the like.