Question:
Which of the following is incorrect in relation to appropriation of credit, in case of multiple debts, as per famous Clayton's rule ?
Which of the following is incorrect in relation to appropriation of credit, in case of multiple debts, as per famous Clayton's rule ?
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Order under Clayton's rule: debtor's direction, then creditor's choice, then the earliest debt first.
Updated On: Oct 3, 2026
- To discharge of the particular debt as per the instruction of the debtor
- If debtor does not intimate or the circumstance do not indicate, as per the discretion of the creditor
- When neither party indicates, to discharge of debt in order of time
- First to discharge of principal and then interest in chronological order
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The Correct Option is D
Solution and Explanation
Step 1: Understanding the Question:
• Clayton's rule (Devaynes v. Noble, 1816) deals with how a payment is applied when a debtor owes several debts to the same creditor. We must find the statement that is not part of the rule.
Step 2: Detailed Explanation:
• First, the payment is applied to the debt that the debtor names (Option A is correct).
• Second, if the debtor gives no instruction, the creditor may apply it to any debt that is due (Option B is correct).
• Third, if neither party gives any direction, the payment is applied to the debts in the order in which they were incurred, the earliest debt first (Option C is correct).
• Option D says that the principal is discharged first and the interest after it. This is not a part of Clayton's rule; where interest is due, payment is applied first to the interest and then to the principal. So Option D is incorrect.
Step 3: Final Answer:
The incorrect statement is Option (D).
• Clayton's rule (Devaynes v. Noble, 1816) deals with how a payment is applied when a debtor owes several debts to the same creditor. We must find the statement that is not part of the rule.
Step 2: Detailed Explanation:
• First, the payment is applied to the debt that the debtor names (Option A is correct).
• Second, if the debtor gives no instruction, the creditor may apply it to any debt that is due (Option B is correct).
• Third, if neither party gives any direction, the payment is applied to the debts in the order in which they were incurred, the earliest debt first (Option C is correct).
• Option D says that the principal is discharged first and the interest after it. This is not a part of Clayton's rule; where interest is due, payment is applied first to the interest and then to the principal. So Option D is incorrect.
Step 3: Final Answer:
The incorrect statement is Option (D).
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