Summary
Summary VHD Sem test 1
Covers Theme 1 (Study unit 2 and 3) and Theme 2 (Study unit 1,2 and 4). Textbook, class slides, articles and case law summarised.
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BIANCA & JAMIE©
Study Theme 1: Payment
Study Unit 2: The Legal Nature of Payment:
What is payment:
What is payment:
- ‘Payment’ has a wide and narrow meaning
- S v Harvey (1987):
o [Wide meaning]
o The term payment is used in a wider sense to show the
performance or satisfaction of an obligation or the furnishing of
what is due
o In the case it was said that the word ‘payment’ has a wide and
narrow meaning
o In its wide sense, it means the satisfaction or performance of an
obligation
o In its narrow sense, it means something that can be calculated
in money
- Harrismith Board of Executors v Odendaal (1923):
o [Earlier narrower definition of ‘payment’]
o Payment is the delivery of what is owed by a person competent
to deliver to a person competent to receive
Sharrock’s definition (in The Law of Banking and Payment in South Africa
(2016))
- Payment is the rendering of what is owed under a monetary obligation
by a person competent to render it to a person competent to accept it
Payment discharges an obligation and any obligation accessory to it. In
Roman law, the word solutio was used to describe the discharge of an
obligation by performance. It embraced all forms of performance, including
payment.
Vereins- und Westbank AG v Veren Investments (2002) (SCA)
- [Payment is a bilateral juristic act requiring the agreement or
cooperation of at least 2 parties]
- [Involved a letter of credit]
Facts:
- In 1991 Nedbank issued a letter of credit for $434 782,61 in United
States currency in favour of a German supplier
- The letter of credit stated that it was available after 360 days with a
German bank, which is the present appellant (‘the German bank’).
- The South African buyers supplied, and the local bank still held, the
then Rand equivalent of the dollar drawing (R1 119 356,60).
- By the time the due date arose, however, a dispute had arisen about
the shipment of the goods. The South African buyers contended that
the documentation was forged, that the goods had never been
shipped, and that the local bank was neither entitled nor obliged to
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pay out on the letter of credit. The German bank contended that
despite these assertions it was entitled to payment.
- The local bank sought a direction from the South African Reserve
Bank (SARB), which ruled that the funds ‘must be paid into an
account blocked in terms of Regulation 4(2) of the Exchange Control
Regulations1 until such time as the matter has been clarified
satisfactorily’.
- SARB later informed the local bank that the funds had been
unblocked.
- On 28 April, the local bank advised the German bank of this, but also
informed it that a High Court application was pending to prevent it
from releasing the funds.
- Within hours of the account being unblocked, the South African
buyers obtained an interim order attaching the sum of R1 119 356,80
plus interest in the hands of the local bank. The order interdicted the
local bank from dealing with the amount and directed that it be paid
into a special interest-bearing account pending an action by the South
African buyers against the German supplier, the German bank and
the local bank.
- The local bank thereupon transferred the amount into an account in
the name of the Sheriff of the Court.
Legal issue:
- Before this Court the German bank’s principal argument was that the
local bank had made an effective payment by depositing the funds
into an account in its name.
- What is at issue before this Court therefore is solely the German
bank’s entitlement, as between it and the local bank, to the money
credited to an account in its name in February 1992.
SCA:
- Cameron AJ said that the established view is that payment is a
bilateral act, which in the absence of contrary agreement,
requires the cooperation of the debtor and creditor
- Nienaber AJ said that performance of an obligation, whenever the
cooperation of a creditor is required in order to enable the debtor
to affect it, consists of a bilateral juristic act
- Payment of a money debt is a case in point
- It requires an animus solvendi of the debtor corresponding to
that of the creditor as to the manner recognised by law where the
debtor relinquishes and the creditor acquires access to and
control over the funds to be transferred
- A debtor, for instance, would not be able to make payment by
electronic transfer to his creditor’s banking account unless the
creditor has furnished him with his banking details for that purpose
- In such a case, although the creditor can draw on it, it would not
count as proper performance binding the creditor, because his
corresponding animus solvendi is lacking
- He may reject any such attempt at payment if some or other legal
consequence, such as the cancellation of a lease, should be dependent
on it
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- In different circumstances, his conduct may however indicate assent
after the event
For payment to take place, the debtor must give the creditor an
unfettered right to the immediate use of the funds in question. No
payment happens in the case of an electronic transfer of funds if the funds
transferred are not immediately and unconditionally available to the
creditor, of if the transfer imposes a duty on the creditor to hold the funds
separately for the debtor or for a third party.
Both parties must have contractual capacity.
If a creditor refuses a debtor’s tender of payment, no payment takes place,
but has significant legal consequences for the creditor.
Legal concept of money:
‘Money’ in the sense of currency has been judicially defined as:
- That which surpasses freely from hand to hand throughout the
community in the final discharge of debts
‘Money’ in the strict legal sense refers to:
- All chattels (tangible movable property) which are issued under the
authority of the State of issue and which, in terms of the law, are
denominated with reference to a unit of account (have nominal value)
and serve as the universal means of exchange in that State
In SA only notes and coins issued by the Reserve Bank have these
attributes.
Funds held in a bank account, credit facility with a bank or electronic
money are widely accepted as the equivalent to money for economic
purposes and perform the function of a medium of exchange. But they do
not satisfy the legal definition of money.
Foreign currency is also not money for legal purposes.
In terms of this definition, for something to qualify as ‘money’ in a legal
sense:
- It must firstly be a chattel – tangible movable property
- Secondly, it must be issued by or under the authority of a state
- Thirdly, must have a nominal value determined by reference to a unit
of account (unit of account in SA = Rands and Cents)
- Finally, it must be the universal means of exchange throughout the
territory of the issuing State
o It must be accepted as a medium of exchange, and not
considered as goods or merchandise
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o It must not be linked to the credit of the transferor, but given
and accepted as final payment of a debt
o It must be capable of passing between parties through delivery
o It must be self-contained in the sense that it requires no
collection, clearing or settlement and leaves no record
o The transferee must be able to take it free of the claims of all
prior owners or holders
Over the centuries a diverse range of objects have served as money, but the
need for money to function effectively as a medium of exchange, in
particular, the need for it to be standard, durable and easy to handle, has
reduced the forms of money in use to coins and notes
Medium of payment:
Unless parties agreed otherwise, payment of a money debt must be in legal
tender.
Legal tender = banknotes and coins
Creditor is obliged to accept in redemption of the debt all banknotes and
coins offered. In SA, only the Reserve Bank has the power to issue these
banknotes and coins.
S 17 of the South African Reserve Bank Act 90 of 1998:
- The following are considered legal tender for payment of amounts due:
o Banknotes of any amount
o Gold coins of any amount
o Other coins up to R50 where coins are denominated in R1, R2
or R5
o R5 where coins are denominated in 10c, 20c or 50c
o 50c where coins are denominated in 1c, 2c or 5c
If a debt is expressed in foreign currency:
- Unless agreed otherwise, the debtor has the choice of paying in that
currency or paying in SA currency converted at the rate of exchange
prevailing at time of payment
- NOT at the rate of currency prevailing at conclusion of the contract or
when the debt became due
- Unless agreed otherwise, a creditor is entitled to refuse a payment
which does not qualify as legal tender
Amount of payment:
For a tender of payment to be valid, it must be for the full amount owing.
The creditor can insist on the exact sum being paid and cannot be forced to
give change unless agreed otherwise.
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