Law of Banking and

Instruments of Payment
LWPYA2-44

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Higher Education Act, 101, of 1997. Registration Certificate number: 2001/HE07/008
Week 2: Lesson 2
Payments
3.1 Explain the nature of payment including solutions
therefor.

3.2 Discuss the 'rendering of what is owed' and how

this is achieved.

3.3 Explain the general rule for payment to be deemed

to have taken place.

3.4 Define ‘money’ and its inclusions and exclusions.

3.5 Explain all concepts relating to payment and their

legal effect

3.6 Apply concepts, statutes and case law to a set of facts as it

relates to payment.
Week 2: Lesson 2
Payments
4.1 Differentiate between payment a mechanism and a
payment system.

4.2 Explain the scope of the various Acts applicable to

payment systems in South Africa.

4.3 Compare various categories of payment.

4.4 Discuss the liabilities and/or risks associated with

each category of payment.

4.5 Discuss unauthorised/erroneous

payments/transfers and the right of recovery.

4.6 Advise on all of the above with reference to concepts to a

set of facts, legislation, case law and/or journal articles.
 The nature of payments

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
 The nature of payments

Payment is a Payment = Can also

Payment discharges bilateral (two mean the
the obligation and parties) juristic act performance or
any obligation requiring the satisfaction of an
accessory (added) to agreement or co- obligation or the
it operation of both furnishing of what
parties is due
Questions for Discussion
Discussion
Discuss the difference between wide sense and narrow sense of
Discuss
payments

Explain When did payment take place?

Explain What does it mean when it is said that payment is bilateral?

Discuss When is an animus solvendi required?

How is payment(s) by a person who lacks the necessary

Explain
capacity recoverable?
 The legal concept of money:

E-money = Funds
Money, in the sense Collectors notes and held in a bank or
It must have
of (fiat) currency = coins = ‘Money’ can credit facility are
nominal
Judicially defined as qualify as widely accepted as
(name/face) value Foreign currency
‘that which passes goods/merchandise equivalent to
determined by (forex) is also not
freely from hand to /merx, i.e. valued money for
reference to a ‘unit money for legal
hand throughout not in terms of economic purposes
of account’ (i.e. purposes
the community in nominal value, but & perform the
Rands and cents in
final discharge of agreed upon function of a
South Africa)
debts’ intrinsic value medium of
exchange
Activity
The medium of payment: Discussion

Unless agreed otherwise, payment of debt must be made in

‘legal tender’
This means a creditor is obliged to accept banknotes and
coins in redemption of debt.
Only the South African Reserve Bank (central bank) has the
power to issue ZAR.
Discuss Section 17 of the South African Reserve Bank Act
 The amount of payment:
For a tender of payment to be valid it must be for the full amount owing (at that time)

The creditor may insist on the exact sum being paid (she/he cannot be compelled to give change, or to
accept payment by installments)

Cheques are no longer widely used in commerce in South Africa

A creditor may insist on payment in cash

If a tender of payment is for the full amount owing, the creditor is not entitled to refuse it, and can be
made to perform (reciprocity principle) (Boland Bank Bpk v Steele)

The amount owing and payable is generally that specified in the contract
Questions for Discussion
Discussion

Explain Discuss Explain

The difference
Who bears the risk in
between the nominal
Currency nominalism the fluctuation of
sum and functional
currency?
value
The time and place of payment:
• Payment must be made at the time or within the period expressly
or tacitly agreed upon
• A specified date = Debtor has until last moment to pay (usually
‘close of business’ at 17:00 on working/business days)
• Court must look to what the parties intended, in order to ascertain
The time of payment: exact time when payment falls due (day, week, month etc.)
• If the court is unable to determine this, it must resort to the
civilian method for computation of time periods given by him/her
to the bank
• If circumstances dictate otherwise, then the court must adopt the
natural method of computation
• The debtor must make payment at the place expressly or tacitly
(or by implication) agreed upon (if any)
• In the absence of express or tacit agreement on where payment
must be made, the place must be determined by reference to
statute, trade usage, or common law rules relating to that type of
The place of payment: contract services for the customer
• Debtor must be given a reasonable opportunity to perform, with
reasonable notice
• Payment to a person/entity outside the Republic = Prohibited
without Treasury (Minister of Finance) (and Reserve Bank’s
permission – i.e. in terms of the exchange control regulations)
 Payment to a third party:
: it in discharge of the debt
For a payment to discharge the debt, the payment must be made to a person recognised by
law as competent to receive

If the creditor appoints an agent to accept payment on his /her behalf in discharge of the debt, or
designates a third person (such as his/her own creditor) to whom payment may be rendered in the
discharge of the debt, the debtor may pay the agent or third person, although he is not compelled to do so

If the debtor and creditor agree that the debtor will make payment to a third party (usually the creditor of
the creditor), known in Roman law as an adiectus solutionis causa, the debtor has a contractual right to pay
such adiectus

The creditor may be estopped from denying the agent’s authority to accept performance if she/he fails to
give adequate notice of revocation to the debtor

Unauthorised performance to the creditor’s creditor should not discharge the debt and the principles of
unjustified enrichment and negotiorum gestio
 Payment by a third person:
Since payment of a monetary debt involves no delectus personae, it may be made by the debtor’s agent, by
a surety for the debtor, :
or by an independent third person

:
The third person may make payment without the knowledge or consent of the debtor, and even against his
will

The creditor may not refuse tender of payment on the basis that it emanates from someone other than the
debtor or a person appointed by the debtor

A third party must make it clear that she/he is paying on behalf of someone else in order to discharge the
debt –The payment must be unconditional
The creditor may reject the payment if it is conditional, or if the third person fails to indicate on behalf of whom he is
paying, or if the third person makes payment to purchase and obtain cession of the creditor’s claim against the
debtor

If a third person/party makes payment on behalf of a debtor, the third person

has a right of recovery against the debtor in certain circumstances

Questions for Discussion
Discussion

1. Are you entitled to get a receipt once payment is made?

2. What does the appropriation of payment mean?

3. Explain what is meant by appropriation by the parties?

4. Explain the residual appropriation rules.

 Guarantee of payment
• Payment guarantees are typically used in sales of land to ensure
that payment takes place
• In a sale of land for cash, the buyer is obliged, in principle, to pay
the price against (pari passu with) the registration of transfer of
the land in the Deeds Registry
 Guarantee of payment
To minimise this risk the buyer must, prior to
registration of transfer, do one of the following:

Hand the money to

Provide the seller
an agreed third
with a suitable
person (stakeholder)
guarantee, e.g. a
Pay the money over – Such as paying it
bank guarantee for
to the seller (risky) into the trust account
payment of transfer
of an estate agent, or
etc. (option chosen
attorney i.e. pending
most often)
the transfer
 Payment ‘in full settlement’:

A debtor who denies

owing the full What about the
amount claimed by balance?
the creditor may
tender
payment of a lesser
amount and The parties have
accompany the concluded a
tender with the compromise
words ‘in full
settlement’
A compromise is an agreement between the parties
to a disputed obligation or to a lawsuit, settling the
matter in dispute, each party receding from her/his
previous position and conceding something

Compromise (transactio or oblatie) is usually classified

as a form of novation
Questions for Discussion
Discussion

Discuss Discuss Explain

What is the May the creditor How does a

What is meant by
meaning of a keep the payment compromise
payment in full
conditional and sue for the differs from a
settlement?
payment? balance? novation?
 Set-off

Excluded
method by which
mutually owed debts, Requirements to operate The effect
contractual or
otherwise, are
extinguished The parties to the set-off must be
separate legal entities
Set-off operates automatically
The parties must be mutually indebted to (ex lege/ipso jure by operation
each other, and each must owe and be of law), as soon as the
owed in the same capacity requirements set out are met, it
need not be specifically invoked
Debts belonging to the same genus
qualify for set-off
Not a voluntary
The debts must be due and act like payment is
enforceable
Set-off must be
pleaded and proved
The debts must be for a court to be
liquidated able to take
cognisance thereo
 The creditor makes it clear
that she/he will not accept
any tender of payment

The creditor fails to carry

out his obligation to
account to the debtor,
Frustration
The debtor tenders full
with the result that the
debtor is unable to
of and unconditional
payment to the creditor
determine how much
he/she is obliged to pay payment and the latter refuses it

The creditor makes it impossible

for the debtor to make a
payment in accordance with the
terms of the contract
Activity
Discussion

Divide the class into 2 groups.

1. Discuss what is meant by mistaken payment.
2. Discuss payment obtained by theft or fraud
 If a debtor alleges that he/she has paid her/his debt, the onusis on
her/him to prove it

If he/she fails to establish his/her allegation on a balance of

probabilities (51%), judgment must go against her/him (there is no
Proof question of the court granting absolution from the instance)

of
A receipt is prima facie proof of the payment of a money debt
payment
A party who makes payment of a debt is entitled to a receipt and may
withhold payment until she/he receives one
 Paper-Based Transfers

ACs: 5.1 – 5.3.

Electronic Fund Transfers (EFTs)

ACs: 6.1 – 6.6.