Multiple choice

Where neither the debtor nor the debtor signifies the manner of appropriation then the payment shall be applied in the order of

  1. time of debt (earliest debt first) irrespective of the limitation period

  2. larger of the amounts first

  3. smaller of the amounts first

  4. None of the above
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A Correct answer
Explanation

When neither the debtor nor creditor specifies how to apply a payment, the law requires it to be applied to the earliest debt first, irrespective of the limitation period. This is known as the rule of appropriation in debt payment. The other options (larger amount first, smaller amount first) are not the legal default.

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