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Summary VHD 320: Theme 1: Payment
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THEME 1: PAYMENTTable of Contents
Study Unit 2: The Legal Nature of Payment................................................................................... 2
1. THE LEGAL NATURE OF PAYMENT: ................................................................................................ 3
2. THE LEGAL CONCEPT OF MONEY – WHAT IS MONEY & WHY IS IT NB?: ....................................... 6
3. THE MEDIUM OF PAYMENT: .......................................................................................................... 7
4. AMOUNT OF PAYMENT: ................................................................................................................ 7
5. TIME & PLACE OF PAYMENT: ......................................................................................................... 7
6. RECEIPT: ......................................................................................................................................... 8
7. APPROPRIATION OF PAYMENTS: ................................................................................................... 8
8. PAYMENT ‘IN FULL AND FINAL SETTLEMENT’:............................................................................... 9
9. SET-OFF: ......................................................................................................................................... 9
Study Unit 3: The Bank-Customer Relationship in Payment ......................................................... 10
1. CLASSIFYING THE BANK-CUSTOMER RELATIONSHIP: .................................................................. 11
2. CLASSIFYING THE RELATIONSHIP BETWEEN BANK AND CUSTOMER: ......................................... 12
3. GENERAL ELEMENTS OF THE BANK-CUSTOMER RELATIONSHIP: ................................................ 12
4. BANKS DUTIES – SPECIFIC: ........................................................................................................... 13
5. BANKS DUTIES - GENERAL:........................................................................................................... 14
6. CUSTOMERS DUTIES: ................................................................................................................... 15
7. ROLE OF THE CODE OF BANKING PRACTICE: ............................................................................... 15
8. TERMINATION OF THE BANK-CUSTOMER RELATIONSHIP: .......................................................... 15
Page 1 of 16
,Study Unit 2: The Legal Nature of Payment
This study unit sets the basis for the remainder of the course and will constantly be
referred to in later themes and discussions on the different methods of payment
i.e. paper based and electronic methods of payment.
Learning objectives
1. explain the legal nature of payment;
2. explain what is meant with the term’s money and legal tender;
3. demonstrate your ability to distinguish between the different elements for
the valid tender of payment, including the amount of payment, the time
and place of payment; payment by or to a third party;
4. examine the rights and duties of a creditor who has received payment in
respect of issuance of receipts and appropriation of payments;
5. explain, discuss and be able to apply the legal principles that are relevant
in:
a. conditional payment;
b. payment in full and final settlement; c) set-off and d) frustration of
payment;
6. apply the abovementioned principles/law to practical scenarios to solve
legal problems.
Compulsory reading
1. Verreins- und Westbank AG v Veren Investments 2002 (4) SA 421 (SCA)
Page 2 of 16
, 1. THE LEGAL NATURE OF PAYMENT:
• Payment has a wide / narrow meaning attached to it:
o S v Harvey 1987 (3) SA 40 (ZS)
▪ In this case it was said that the word ‘payment’ has a wide as well as a narrow
meaning:
• The term ‘payment’ is used in a wider sense to show the performance
or satisfaction of an obligation OR the delivering of what is due.
• In the narrow sense it means something which can be calculated in
money.
o Harrismith Board of Executors v Odendaal 1923 AD 530 at 539
▪ Narrower sense: ‘Payment’ is the delivery of what is owed by a person
competent to deliver to a person competent to receive.
• Sharrock (The Law of Banking and Payment in South Africa, Chapter 6, pg 194-195)
o ‘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:
o Payment discharges any obligation accessory to it.
o In Roman law, the word ‘solutio’ was used to describe the discharge of an obligation by
a performance.
o Payment is a bilateral juristic act requiring the agreement/ co-operation of at least 2
parties.
▪ Verreins- und Westbank AG v Veren Investments 2002 (4) SA 421 (SCA)
• In this case, the court had to deal with a particular type of negotiable
instrument used in international trade. This negotiable instrument is
known as a documentary letter of credit.
• Facts of the case & question before the SCA:
o In 1991 Nedbank issued a letter of credit for $434 782,61 in
United States currency in favour of a German supplier
o The letter of credit stated that it was available after 360 days
with a German bank, which is the present appellant (‘the
German bank’).
o The South African buyers supplied, and the local bank still held,
the then Rand equivalent of the dollar drawing (R1 119 356,60).
Page 3 of 16
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