Payment and Consignment in Civil Code
Offering Payment and Consignment
Governed by Civil Code Articles 1176 to 1181.
The debtor is required to pay but also has the right to discharge the debt by paying. However, situations arise where the debtor wants to pay, but for reasons beyond their control, cannot do so. For example, when the creditor unreasonably refuses to accept payment.
For this discharge, the law provides a means available to the debtor of an obligation to give. It consists of the delivery and deposit of the thing due to the judicial authority. This option is available when the creditor refuses or cannot accept payment for reasons not attributable to the debtor.
In relation to the scope, it applies only to positive obligations. Regarding the stages, it consists of:
a) Offer of Payment
It functions as the prerequisite for consignment.
It is a mechanism that the law gives the debtor of an obligation, which has been unable to meet because the creditor unreasonably refused to receive the thing, giving rise to legal deposit.
It is a unilateral declaration of will, in which the debtor expresses their firm intention to comply.
In the form of offering, the Code does not require a special form. The debtor can do it in the way they find most comfortable, but also in a way that can be proven (e.g., a notarized letter). It is necessary that after the offer of payment, the obligation cannot be met through no fault of the debtor.
Article 1176 states that the offer of payment must be made as a precondition for consignment, but there are exceptions in the same article, in which the debtor is allowed to make a direct consignment:
- Absence of the creditor: concerning the creditor not being physically present.
- Incapacity of the creditor: temporary or factual disability.
- Several persons entitled to collect: Litigation or dispute about the right of credit.
- Loss of the title of the obligation: no one knows who the creditor is because there is no title, so it is consigned.
b) Requirements
It is necessary that when the debtor consigns, they meet the legal requirements established by law. The debtor makes a statement to the court for the consignment, and this is transferred to the creditor.
- Offer of payment: If the creditor to whom the debtor offers to pay refuses to receive it without reason, the debtor is free of responsibility by consigning the thing due. The provision alone produces the same effect when the creditor is disabled to receive payment at the time of taking it, when several persons intend to have the right to receive, or when the title of the obligation has been lost (Article 1176).
- Article 1177.1: It must be announced to those concerned. It will be ineffective unless it meets the conditions of payment.
- Article 1178: The debtor must prove to the judge the offer of payment and, upon completion of the consignment, that the announcement was made to the other stakeholders.
c) Effects of Consignment
If the creditor accepts the consignment, or the judge states that the consignment is well done, it displays all its effects:
- The consignment or legal deposit is final, and therefore is irrevocable.
- The debtor is discharged, and therefore the obligation is also extinguished. (Art. 1176)
- The cancellation of the obligation proceeds (Art. 1180.1), which represents constancy in the judge’s statement that the obligation has been extinguished by the consignment.
- The expenses of the consignment shall be borne by the creditor (Art. 1179).