Legal Definitions - datio in solutum

Term: datio in solutum

Datio in solutum refers to a legal principle where an existing debt or obligation is settled by providing and accepting something different from what was originally agreed upon. Instead of fulfilling the original terms, the parties mutually agree to substitute the original form of payment or performance with an alternative asset or service, which then fully discharges the obligation.

• Example 1: Settling a Monetary Debt with Property
  A small business owner owes a supplier $10,000 for materials. Due to a temporary cash flow problem, the business owner offers to transfer ownership of a company vehicle, valued at $10,000, to the supplier instead of the cash payment. The supplier, needing a new delivery vehicle, agrees to accept the vehicle as full and final payment for the debt.
  This illustrates datio in solutum because the original obligation was a specific sum of money, but it was discharged by the mutual agreement to accept a different asset (the vehicle) in its place.
• Example 2: Fulfilling a Service Contract with Goods
  A freelance web developer was contracted to build a new website for a client, with the agreed payment being $5,000 upon completion. After the website is finished, the client, who also owns an electronics store, offers the developer a brand new, high-end computer workstation worth $5,000 instead of the cash payment. The developer, needing an upgrade, accepts the computer as full payment for their services.
  Here, the original obligation was a cash payment for services rendered. The client's obligation was settled by providing a different item (the computer workstation) that was mutually accepted as an equivalent substitute.
• Example 3: Substituting Goods in a Sales Agreement
  A farmer had agreed to sell and deliver 500 pounds of organic blueberries to a local restaurant. However, an unexpected late frost severely damaged the blueberry crop. To fulfill the spirit of the agreement, the farmer offers to deliver 600 pounds of organic raspberries, which are of similar value and also in demand by the restaurant, instead. The restaurant owner agrees to this substitution.
  This demonstrates datio in solutum because the original obligation was to deliver a specific type of goods (blueberries). The farmer's obligation was discharged by delivering a different type of goods (raspberries) that was mutually agreed upon by both parties as an acceptable alternative.