Obligation to pay

The payment obligation is the duty to make a disbursement to another person (natural or legal). This, in view of the fact that a debt has been previously acquired.

Obligation to pay

In other words, a payment obligation is a commitment that is assumed when receiving financing or buying on credit.

From the point of view of law, this obligation is the legal bond that unites the creditor with a debtor. The latter must then make the corresponding consideration in the time stipulated between the parties.

We must point out that the payment obligation is extinguished once the agreed commitment has been fulfilled.

Another fact to highlight is that the payment obligation usually knows financial expenses or interest in favor of the creditor. This, in view of the fact that the debtor must compensate his counterpart for the time that his money was able to generate a return, for example, in a bank deposit or in an investment.

Parts of a legal obligation

In a legal obligation the following parts can be distinguished:

  • Creditor: It is a person, natural or legal, who has delivered a loan or material good to another person.
  • Debtor : It is a person, natural or legal, who owes money to the creditor.
  • Purpose: It is the performance required of the debtor to the creditor.
  • Cause: It is the reason why the payment obligation originated, for example, a mortgage loan.

Example of payment obligation

An example of a payment obligation can be the commitment of the issuer of a bond. Let’s imagine that it is a zero coupon bond issued below par and with a price of 10,000 euros.

So, if it was issued at a 20% discount (the period of the discount and the instrument is the same), the payment obligation (which would be the nominal value of the bond) would be calculated as follows:

10,000 = nominal value * (1-20%)

nominal value = 10,000 / 0.8 = 12,500 euros