UNIDROIT Principles of International Commercial Contracts with Official Commentary [1994]

CHAPTER 6 - PERFORMANCE

SECTION 1: Performance in General

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ARTICLE 6.1.12 - (Imputation of payments)

Article 6.1.12 - (Imputation of payments)

COMMENT

Illustration

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Article 6.1.12 - (Imputation of payments)

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(1) An obligor owing several monetary obligations to the same obligee may specify at the time of payment the debt to which it intends the payment to be applied. However, the payment discharges first any expenses, then interest due and finally the principal.

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(2) If the obligor makes no such specification, the obligee may, within a reasonable time after payment, declare to the obligor the obligation to which it imputes the payment, provided that the obligation is due and undisputed.

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(3) In the absence of imputation under paragraphs (1) or (2), payment is imputed to that obligation which satisfies one of the following criteria in the order indicated:

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(a) an obligation which is due or which is the first to fall due;

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(b) the obligation for which the obligee has least security;

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(c) the obligation which is the most burdensome for the obligor;

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(d) the obligation which has arisen first.

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If none of the preceding criteria applies, payment is imputed to all the obligations proportionally.

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COMMENT

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Arts. 6.1.12 and 6.1.13 deal with the classic problem of imputation of payments. If an obligor owes several monetary obligations at the same time to the same obligee and makes a payment the amount of which is not sufficient to discharge all those debts, the question arises of the debts to which that payment applies. Art. 6.1.12, which is inspired by widely recognised principles, offers the obligor the possibility of imputing its payment to a particular debt, provided that any expenses and interest due are discharged before the principal. In the absence of any imputation by the obligor, this provision enables the obligee to impute the payment received, although not to a disputed debt. Para. (3) lays down criteria which will govern in the absence of any imputation by either party.

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Illustration

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A receives under separate contracts three loans, each of US$ 100,000, from bank B payment of which is due on 31 December. B receives US$ 100,000 from A on 2 January with the imprecise message: "Reimbursement of the loan". B pays little attention to the matter and at first does not react, but three months later sues A for payment of the remaining US$ 200,000 and the parties disagree as to which of the loans had been reimbursed by the January payment. B had similar security in each case, but the interest rates were not the same: 8% on the first loan, 8,50% on the second and 9% on the third. The January payment will be imputed to the third loan.

UNIDROIT Principles of International Commercial Contracts with Official Commentary [1994]

PREAMBLE

CHAPTER 1 - GENERAL PROVISIONS

CHAPTER 2 - FORMATION