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Discharge-for-value defense: Difference between revisions
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{{a|negotiation|}}{{Discharge for value capsule}} | {{a|negotiation|}}{{Discharge for value capsule}} | ||
This is based on American Law Institute’s 1937 ''Restatement (First) of Restitution'', Section 14 of which provides: | |||
{{quote|“A creditor of another or one having a lien on another’s property who has received from a third person any benefit in discharge of the debt or lien, is under no duty to make restitution therefor, although the discharge was given by mistake of the transferor as to his interests or duties, if the transferee made no misrepresentation and did not have notice of the transferor’s mistake.”}} | |||
Note in particular the finding in {{casenote|Citigroup|Brigade Capital Management}} — which, in our humble opinion, rather mounts the pavements — sidewalks, sorry — and runs down peacable pedestrians perambulating the [[common law]] of [[contract]] – that it it makes no difference that, at the time of the mistaken payment, the debt in question was not yet due under the contract. | Note in particular the finding in {{casenote|Citigroup|Brigade Capital Management}} — which, in our humble opinion, rather mounts the pavements — sidewalks, sorry — and runs down peacable pedestrians perambulating the [[common law]] of [[contract]] – that it it makes no difference that, at the time of the mistaken payment, the debt in question was not yet due under the contract. | ||
There is no equivalent under the English law of [[restitution]], where an enriched lender has to return the money: {{casenote|Barclays Bank Ltd|WJ Simms}}. This darkened cranny of the common law was exposed to harsh daylight when [[Citigroup v Brigade Capital Management|Citigroup tripped over it]] while trying to reclaim half a [[yard]] they’d accidentally shelled out to some distressed debt lenders to Revlon in 2020. | There is no equivalent under the English law of [[restitution]], where an enriched lender has to return the money: {{casenote|Barclays Bank Ltd|WJ Simms}}. This darkened cranny of the common law was exposed to harsh daylight when [[Citigroup v Brigade Capital Management|Citigroup tripped over it]] while trying to reclaim half a [[yard]] they’d accidentally shelled out to some distressed debt lenders to Revlon in 2020. | ||
It seems to me — for the little that is worth; I am but a traveler in the modern lands — | It seems to me — for the little that is worth; I am but a traveler in the modern lands — that this [[Discharge-for-value defense|discharge for value defense]] needs to be understood where the payer has a general obligation to pay to the receiver: a trade-creditor relationship; for example. Here, the receiver expects payment soon; perhaps not necessarily ''today'', but within 30 days, and this period is not so much an agreed term of finance but a practical, customary indulgence that merchants allow each other to recognise that account payments go on a cycle, in batches, and it is no enormous deal if one is not paid the instant one delivers a service. | ||
In that case, say a debtor owes a creditor £100, and then pays such a payment, again, sensible practice and custom would be to allow the creditor to treat that amount as satisfying that debt. This is not, really, a defense to an action in restitution so much as the operation of basic principles of [[set-off]]. It would be perverse indeed, and frivolous, for a debtor to try to claw back funds it was going to have to pay in the next week or so anyway. | In that case, say a debtor owes a creditor £100, and then pays such a payment, again, sensible practice and custom would be to allow the creditor to treat that amount as satisfying that debt. This is not, really, a defense to an action in restitution so much as the operation of basic principles of [[set-off]]. It would be perverse indeed, and frivolous, for a debtor to try to claw back funds it was going to have to pay in the next week or so anyway. | ||