(1) Payment may be made in any form used in the ordinary course of business at the place for payment.
(2) However, an obligee who accepts, either by virtue of paragraph (1) or voluntarily, a cheque, any other order to pay or a promise to pay, is presumed to do so only on condition that it will be honoured.
Discharge of monetary obligations is frequently made by cheques or similar instruments, or by transfers between financial institutions. The problems involved have however very seldom been the subject of codification, one notable exception being the UNCITRAL Model Law on International Credit Transfers. Without attempting to provide a detailed regulation, which would not be compatible with the very rapid evolution of techniques in this field, Articles 6.1.7 and 6.1.8 establish some basic principles which should be of assistance in regard to international payments.
1. General rule regarding form of payment
Paragraph (1) allows for payment to be made in any form that is usual at the place for payment. Subject to the reservation contained in paragraph (2), the obligor may for instance pay in cash, by cheque, banker’s draft, a bill of exchange, credit card, or in any other form such as the newly developing electronic means of payment, provided it chooses a mode that is usual at the place for payment, i.e. normally at the obligee’s place of business. In principle, the obligee should be satisfied to receive payment in a form that is customary at its place of business.
1. A, an importer in Luxembourg, receives a bill for goods bought from B, a firm in Central America, and sends a eurocheque in payment. B may reject this mode of payment if the banks in its country are not familiar with eurocheques.
2. Presumption that payment will be honoured a condition for acceptance
Paragraph (2) states the generally recognised principle according to which the obligee’s acceptance of an instrument that has to be honoured by a financial institution or another person (a third person or the obligor itself) is given only on condition that the instrument will actually be honoured.
The presumption can sometimes be overturned by usages. There are for instance countries where delivery of instruments such as certified cheques, banker’s drafts and cashier’s cheques is considered as being equivalent to payment by the obligor, with the consequence that the risk of the bank’s insolvency is transferred to the obligee. In such countries, the rule in Article 6.1.7(2) would apply only to so-called personal cheques.
2. A, a contractor, must pay B, a sub-contractor, for work completed by the latter on a building site. A is experiencing a cash-flow crisis as its client C is late in paying the first instalment due. C has however given A a set of promissory notes up to the amount of its debt. A offers to pay B by assigning a sufficient number of promissory notes. If B accepts them (in this case it probably does not have to do so as this is not a usual form of payment), the effectiveness of the payment by A to B is conditional on C’s honouring the promissory notes at maturity.