Dation

Dation, also known as dación en pago in some civil-law jurisdictions, is a method of extinguishing an obligation by the debtor delivering property or performing an act that the creditor accepts in satisfaction of the claim. The debtor’s offer and the creditor’s consent are essential, and the obligation is discharged to the extent of the value of the transferred item or performed act.

Dation is most commonly used in civil law systems for movable or immovable property, but can encompass other assets or services. It is a bilateral settlement mechanism rather than a unilateral payment, and the creditor’s acceptance converts the obligation into a completed settlement between the parties. The transaction does not require a new monetary debt to replace the old one; rather, the original obligation is satisfied by the agreed in-kind performance.

Conditions and practical considerations include that the asset offered must be capable of transfer to the creditor and free from impediments that would prevent use, and that valuation reflects the debt’s amount. The creditor’s decision to accept may depend on the asset’s liquidity, market value, and relevance to the debt.

Effects include discharge of the debt to the value of the delivered asset, with any shortfall typically remaining as a balance owed, and any surplus potentially returned to the debtor or kept by the creditor, depending on law and agreement. Dation is distinct from novation (which substitutes a new obligation) and from assignment of a claim, and its availability varies by jurisdiction.