Legal Principles of Payment and Debt Settlement

Subject of Payment

The payment relationship involves two parties: the creditor and the debtor. The debtor, known as the solvens, is responsible for fulfilling the obligation, while the creditor, known as the accipiens, is the recipient. It is legally permissible for a third party to fulfill the obligation, as the primary goal is to satisfy the creditor. Even if a third party pays against the debtor's will, they retain the right to claim reimbursement for the useful amount paid to prevent the unjust enrichment of the debtor.

Objective Requirements

The primary condition for payment is integrity, ensuring the obligation is fulfilled completely.

Effects of Payment

The primary effects are the extinction of the credit and the discharge of the debtor. These effects can be categorized as:

• Accessory or auxiliary: Recognitive, confirmatory, interpretative, and consolidatory.
• Incidental or accidental: Reimbursement of payment, repetition of overpayment, and unenforceability.

Imputation of Payment

Governed by Article 1172 and subsequent sections, imputation is the mechanism used to assign a payment to a specific debt when the amount provided is insufficient to cover all existing debts between the parties. Requirements include:

• A plurality of debts.
• Benefits of the same nature.
• Payment insufficient to cover all debts.

The imputation can be made by the debtor, the creditor, or by law if neither party specifies.

Payment in Kind

While the principle of identity requires the debtor to provide exactly what is owed, parties may agree to a different benefit. If this involves something other than money, it is considered a dation in payment (referenced in Articles 1521, 1839, and 1636).

Transfer of Assets

The transfer of assets is the voluntary abandonment by the debtor of their property to creditors when, due to unavoidable accidents, they are unable to pay their debts. Article 1672 of the Civil Code defines this as a voluntary surrender of assets to satisfy creditors. According to Article 1678, the effects are:

• Debts are reduced to the amount satisfied by the sale of the property.
• If the assets are insufficient, the debtor remains obligated to pay the remainder with future assets.

This assignment does not transfer ownership of the assets to the creditors, but rather grants them the power to dispose of the assets to settle the outstanding loans.