DEBT, a definite sum due by one person to another. Putting aside those created by statute, recoverable by civil process, debts may be divided into three classes: (I) judgment debts (see JUDGMENT DEBTOR), (2) specialty debts, (3) simple contract debts. As to judgment debts, it is sufficient to say that, when by the judgment of a court of competent jurisdiction an order is made that a sum of money he paid by one of two parties to another, such a debt is not only enforceable by process of court, but it can be sued upon as if it were an ordinary debt. A specialty debt is created by deed or instrument under seal. Until 1869 spe cialty debts had preference under English law over simple contract debts in the event of the bankruptcy or death of the debtor, but this was abolished by the Administration of Estates Act of that year. The main difference now is that a specialty debt may, in general, be created without consideration, as, for example, by a bond under seal, and that a right of action arising out of a specialty debt is not barred if exercised any time within zo years, whereas a right of action arising out of a simple contract debt is barred unless exercised within six years. (See LIMITATION, STAT UTES OF.) Any other debt than a judgment or specialty debt, whether evidenced by writing or not, is a simple contract debt. There are also certain liabilities or debts which arise from tacit or implied contracts to pay.
At English common law debts and other choses in action were not assignable (see CHOSE), but by the Judicature Act, 1873, any absolute assignment of any debt or other legal chose in action, of which express notice in writing is given to the debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt, is effectual in law. The discharge of a debt may take place either by payment of the amount due, by accord and satisfaction, i.e., acceptance of something else in discharge of the liability, by set-off (q.v.), by release, or under the law of bankruptcy (q.v.). It is the duty of a debtor to pay a debt without waiting for any demand, and, unless there is a place appointed either by custom or agreement, he must seek out his creditor for the purpose of paying him unless he is "beyond the seas." Payment by a third person to the creditor is no discharge of a debt, as a general rule, unless the debtor subsequently ratifies the payment.
Imprisonment for debt, the evils of which have been so graph ically described by Dickens, was abolished in England by the Debtors Act, 1869, except in cases of default of payment of pen alties, default by trustees or solicitors and certain other cases. But in cases where a debt or instalment is in arrear and it is proved to the satisfaction of the court that the person making default either has or has had since the date of the order or judgment the means to pay the sum in respect of which he has made default and has refused or neglected to pay, he may be com mitted to prison at the discretion of the judge for a period of not more than 42 days. In practice, a period of 21 days is usually the maximum period ordered. Such an imprisonment does not operate as a satisfaction or extinguishment of the debt, and no second order of commitment can be made against him for the same debt, although where the court has made an order or judg ment for the payment of the debt by instalments a power of com mittal arises on default of payment of each instalment. In Ire land imprisonment for debt was abolished by the Debtors Act (Ireland) 1872, and in Scotland by the Debtors (Scotland) Act, 1880. In France it was abolished in 1867, in Belgium in 1871, in Switzerland and Norway in 1874 and in Italy in 1877. In the United States imprisonment for debt was universal under the com mon law, but it has been abolished in every State, except in cer tain cases, as where there is any suspicion of fraud or where the debtor has an intention of removing out of the State to avoid his debts. (See also CONTRACT; BANKRUPTCY ; PAYMENT ; NATIONAL DEBT.) In the United States the law is in general as stated above. But the effect of a seal to make consideration unnecessary to the creation of a debt has been very generally abolished by statute ; even where not abolished, the effect has commonly been reduced to raising a prima facie presumption of consideration. Yet the seal commonly retains its effect of lengthening the period of limitation. The notice of an assignment need not, in the United States, be given to the debtor in writing. And the English rule that payment by a third person will not discharge has either been abolished or rendered substantially null by liberality in con struing the slenderest of evidence into "ratification" by the debtor.
Debt, it should be noted, is the legal counterpart of the eco nomic concept "credit" (q.v.) ; and where liquidity of credit is important, debts are commonly put in the form of negotiable instruments, to facilitate transfer. (See BILL OF EXCHANGE.) There is, however, some financing done by merchants transferring their book accounts—though at a heavy discount. (See ASSIGN