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lwpat, Attorney
Category: Business Law
Satisfied Customers: 25387
Experience:  Attorney with over 35 years of business experience.
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Can you apply payments to older overdue invoices in Delaware

Resolved Question:

Can you apply payments to older overdue invoices in Delaware if no release of Liens was obtained?
Submitted: 6 years ago.
Category: Business Law
Expert:  lwpat replied 6 years ago.
If the check is designated for a particular invoice, then you have to apply it to that particular invoice. If it is designated, then you can apply it to the oldest invoices.
Customer: replied 6 years ago.
The check itself has no designation. The payment stub does have a list of various invoices that that their accounting was applying the check to, but nothing is listed on the actual check. All other builders that we deal with require a signed and notorized release of liens form to receive the check that states the check, invoice, and amount. However, with this builder, we would just receive various checks, with only the paystub description on it. Also, at no time did the builder ask for or receive a release of liens on the property, before or after settling the house with the buyer.
Expert:  lwpat replied 6 years ago.
The paystub would be sufficient to make a specific designation. That is standard procedure and you have to apply the money as directed.
Customer: replied 6 years ago.
But where in the Delaware law does it say that this is sufficient? I know a lot of subcontractors and suppliers that apply all payments to oldest invoices. Every payment that I make to a supplier, whether I specify an invoice or not goes to the oldest invoices. The only exception is when a release of liens is obtained.
Expert:  lwpat replied 6 years ago.
While this is not directly on point, it establishes the prevailing law on the application of payments.

Delaware Code - Section 9-103

(e) Application of payment in non-consumer-goods transaction. -- In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:

(1) in accordance with any reasonable method of application to which the parties agree;

(2) in the absence of the parties' agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or

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