Application of Payments

Application of Payments – the designation of the debt which payment shall be made, out of 2 or more debts owing the same creditor:

stipulation or application of party given benefit of period – OK;

to be valid: must be debtor’s choice or w/ consent of debtor

Requisites for the Application of payment:
1. Various debts of the same kind

2. Same debtor

3. Same creditor

4. All debts must be due
Exception: there may be application of payment even if all debts are not yet due if:
a) parties so stipulate
b) when application of payment is made by the party for whose benefit the term has been constituted

5. Payment is not enough to extinguish all debts

HOW APPLICATION IS MADE:
1. Debtor makes the designation

2. If not, creditor makes it by so stating in the receipt that he issues – unless there is cause for invalidating the contract

3. If neither the debtor nor creditor has made the application or if the application is not valid, then application, is made by operation of law

WHO MAKES APPLICATION:

General Rule: Debtor

Exception: Creditor –

a) Debtor without protest accepts receipt in which creditor specified expressly and unmistakably the obligation to which such payment was to be applied – debtor in this case renounced the right of choice

b) When monthly statements were made by the bank specifying the application and the debtor signed said statements approving the status of her account as thus sent to her monthly by the bank

IN CASE NO APPLICATION HAS BEEN MADE
1. Apply payment to the most onerous

2. If debts are of the same nature and burden, application shall be made to all proportionately

magkano ang bayad montly sa pag-ibig loan?