Partial payment of debts

Article locked Published on by Me Annie Lapointe

Topic(s): Legal

Note aux lecteurs : Ces articles sont des résumés de décisions rendues dans les affaires citées. Veuillez noter qu'il ne s'agit pas d'une revue de la jurisprudence et que d'autres décisions peuvent être rendues par la suite ou être différentes et changer l'état du droit. C'est également le cas si les faits ne sont pas les mêmes que ceux présentés dans l'affaire mentionnée.

Partial payment of debts

Generally speaking, when a person owes several sums of money to another, he or she has the right to decide which amount to pay first, unless another agreement is stipulated by contract. For example, if I owe a friend money on a loan and also another loan for the purchase of his car with the payments being made in installments, I have the right to decide to pay off a part of my loan with the $ 200 I handover today, with the aim of lowering the higher interest, if both debts are due. I should then clearly indicate this possibility.

This principle is also applied in rental law.
However, it often happens that we omit to mention why we are giving a check or making a money transfer. Indeed, this can be the object of confusion for a landlord who receives each month, sums of money from several tenants. Often, all you see on the check is “Rent". Since I may have a balance for the month of August, but the amount of the check is exactly equal to the amount of the rent and it is given to me in September, many might think that it is indeed the payment of the rent for the month of September and that August remains unpaid. However, the law provides that if there is no specific mention in the agreement, it is the oldest debt that is paid first, unless there is more interest to pay another debt first:
« 1572 CCQ In the absence of imputation by the parties, payment is imputed first to the debt that is due.
Where several debts are due, payment is imputed to the debt which the debtor has the greatest interest in paying.
Where the debtor has the same interest in paying several debts, payment is imputed to the debt that became due first; if all of the debts became due at the same time, however, payment is imputed proportionately. "(1)

Here are some applications of this principle: in a situation where a tenant deducted various amounts from her rent, while deducting from her rend a repair she claimed was necessary for the washing machine, and this, over a period of 9 months, the judge decided, in accordance with the law:

The judge decided that the the money received was to be applied against the oldest debt. Has a result the unpaid rent of 631.60$ was for the current rent. The tenant was not late for more than 3 week a the time of the hearing, so the lease cancellation was denied to the landlord.

As the hearing took place in November, the balance owed was equivalent to less than one month's rent, and was not more than three weeks late. In this case, one cannot obtain the termination of the lease, but a only a decision condemning the tenant to pay the amount owed.

In another situation (3), the landlord requested the termination of the lease for non-payment of $ 7,414 for two residential leases. The two tenants operating a business located in the same building. According to the evidence, the tenants are making significant arrears on each of the leases over a period of more than a year and a half.
When the landlord received a payment, he reduced the debt of the tenants in proportion to the price of each rent (two residential leases, one commercial lease).

In this case , the tenants pleaded that this should be done differently arguing that they had more interest to pay the 2 residential leases. The argued that their primary interest was to have a roof over their head and not to pay commercial lease:

The judge agreed, and refused to cancel the residential leases.

Thus, in this case, the payments made by the tenants have covered the residential rents, and any surplus was to be applied against the commercial lease.

To avoid such misunderstandings, it is recommended to specify, when paying a debt on the cheque or on the receipt against witch amount the payment is to be applied.

(1) Civil Code of Quebec, RLRQ c CCQ-1991;
(2) Mazler Properties Inc. c. Di Done, 2020 QCTAL 9343;
(3) Estate of Wong c. Christmas, 2018 QCRDL 13762.

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