Appropriatio

Appropriatio, in a legal context, refers to the act of a debtor designating which of their outstanding debts a payment should be applied to. When a debtor owes multiple debts to the same creditor, or a single debt with different components, and makes a partial payment, the question of how that payment should be allocated can arise.

The debtor typically has the right to direct the appropriation of their payment at the time it is made. This means they can specify which debt or which portion of a debt the payment should reduce. If the debtor fails to specify, the creditor may then have the right to appropriate the payment to any of the outstanding debts. This right of the creditor is often subject to certain limitations, such as not being able to apply the payment to a debt that is already time-barred or to defraud other creditors.

If neither the debtor nor the creditor makes an appropriation, the law may provide default rules for allocation. These rules can vary by jurisdiction but often prioritize applying the payment to the oldest debt, or to debts that are most burdensome to the debtor, or to debts secured by collateral. The principle of appropriatio is important in ensuring clarity and fairness in financial transactions, particularly when multiple obligations exist between parties. It prevents disputes over which debts have been satisfied by a partial payment.