Lecture 1: Introduction, Money, Payment

Payment Definition

•  Performance of a contractual obligation to provide money

• can be made in any form used in the ordinary course of business

Forms Used in Ordinary course of Business

• Electronic Fund Transfers (EFT) and account debiting/crediting.

• Payment cards and credit cards.

• Conditional payment by cheque.

• Settlements in account (specifically in the London insurance market)

Completion of Payment: The When

• Vital for deadlines, bankruptcy, and attachments.

  • The Chikuma Precedent: Payment is only complete when the creditor receives actual cash or something "as good as cash"

• The Test:

  • To be "as good as cash," the funds must be available for immediate and unconditional use. If a recipient has to pay interest to access the funds on the due date, the payment is not legally complete

Functions of money

• Unit of measurement (to determine value),

• Means of exchange (banknotes, coins, or database entries),

• Storage of value

System shift

• From a Convertible System where notes were claims for gold, to an

• Inconvertible system where there is no right to demand gold, but a statutory obligation to accept the currency.

Legal Tender (128 TFEU)

• Issuance Authority: European Central Bank (ECB) the exclusive right to authorize the issuance of euro banknotes.

  • These are the only notes with "legal tender" status in the Union.

• Legal Tender Rights: This status implies mandatory acceptance at full face value and the power to discharge debts.

• The "50 Coin" Rule: No party (except the issuing authority) is obliged to accept more than 50 coins in a single payment.

National Restrictions on MS

•  Member States may restrict cash and mandate electronic payments if the rules are proportionate and serve the public interest (e.g., license fees or anti-money laundering).

• Cash Limits: Examples include Belgium (€3,000), Greece (€500), and France (€1,000). The Netherlands currently has no limit.

Place of Payment

•  If not fixed by contract, the Principles of European Contract Law (PECL) and UK law generally require payment at the creditor’s place of business.

Time of Payment: Of the essence

• Timely payment is a condition.

• Any breach (even a small delay) allows the innocent party to terminate the contract.

Time of Payment: Not of the essence

• Common in sales of goods;

• termination is only allowed if the breach is serious.

Payment on Demand

• Immediately after the demand

• The debtor is granted only the time required to perform the "mechanics of payment" (e.g., the time to process the transfer), not time to actually find or raise the money.