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A payment in execution of a money decree falls short of the amount due. The decree, the debtor and the parties' agreement give no direction on appropriation. How may the decree-holder apply it under…

Question and options

A payment in execution of a money decree falls short of the amount due. The decree, the debtor and the parties' agreement give no direction on appropriation. How may the decree-holder apply it under the ordinary rule?

  1. Apply it to interest, then costs, then principal

  2. Apply it to principal, then costs, then interest

  3. Apply half to principal and half to interest and costs

  4. Apply three quarters to principal and one quarter to interest and costs

Answer and explanation

Correct answer: A - Apply it to interest, then costs, then principal

Absent a controlling direction or agreement, the decree-holder may apply the short payment first to interest, then to costs, and then to principal. Payment is not applied to principal first, and there is no rule splitting it in fixed proportions between principal and the other heads.

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