[co-author: Raghav Vohora]
Following on from our recent coverage of the Revlon loan dispute[1], we briefly consider the nature of payments, as well as the consequences of making an erroneous or late payment. We also address the ways in which parties risk payments being diluted by virtue of forces beyond their control or as a result of common contractual provisions.
What constitutes a payment?
While parties generally understand "payment" to refer to the transfer of money from one party to another to denote the performance or discharge of an obligation to pay, in most instances, payment does not actually involve a physical cash transfer. The reality is that, in most major economies, the exchange of notes and coins comprise just a tiny fraction of the payments made on a day-to-day basis. Instead, large-scale payments typically involve the exchange of credit claims/commitments between commercial banks.