Legal Definitions - in solutum

In solutum refers to a situation where a debt or obligation is satisfied by providing something other than the originally agreed-upon form of payment, typically money. It means that an alternative asset, service, or item is accepted as payment to discharge an existing debt.

• Example 1: Settling a personal loan with an item

  Imagine Sarah owes her friend Mark $5,000. Sarah is experiencing financial difficulties and cannot pay the cash. Instead, she offers Mark her vintage motorcycle, which they both agree is worth $5,000, to settle the debt completely. Mark accepts the motorcycle.

  This illustrates "in solutum" because the motorcycle is provided and accepted as payment for the $5,000 cash debt, even though the original agreement was for money.

• Example 2: A business debt paid with services

  A marketing agency owes a web development firm $15,000 for creating a new client portal. The marketing agency is temporarily cash-strapped but offers to provide $15,000 worth of social media management services to the web development firm over the next six months, in lieu of the cash payment. The web development firm agrees to this arrangement.

  Here, the social media management services are accepted in solutum – as the agreed-upon payment – to discharge the marketing agency's cash debt.

• Example 3: Property transfer instead of mortgage payments

  A homeowner is struggling to make their mortgage payments and owes the bank a significant sum. Instead of continuing to pay cash, the homeowner and the bank agree that the homeowner will transfer ownership of the property directly to the bank, and in return, the bank will consider the mortgage debt fully satisfied, avoiding foreclosure proceedings.

  In this scenario, the transfer of the property itself is accepted in solutum – as payment – to extinguish the homeowner's outstanding mortgage obligation.