Subsection 4: Payment with subrogation

Subrogation takes place by operation of law alone in favour of the person who, having a legitimate interest therein, pays whenever his payment discharges from liability to the creditor the person on whom the final burden of all or part of the debt is to fall.

Conventional subrogation occurs on the creditor’s initiative where the creditor, receiving his payment from a third party, subrogates that third party in his rights against the debtor. This subrogation must be express. It must be agreed at the same time as payment, unless, in an earlier act, the subrogating party has expressed the intention that his co-contractor should be subrogated to him at the time of payment. The concomitance of…

Subrogation also occurs where the debtor, borrowing a sum for the purpose of paying his debt, subrogates the lender in the rights of the creditor with the latter’s concurrence. In this case, the subrogation must be express and the receipt given by the creditor must indicate the source of the funds. Subrogation may be granted without the assistance of the creditor, but on condition that the debt is due or…

Subrogation cannot prejudice the creditor where he has been paid only in part; in that case, he may exercise his rights, in respect of what remains due to him, in preference to the person from whom he has received only partial payment.

Subrogation transfers to its beneficiary, within the limit of what he has paid, the claim and its accessories, with the exception of rights exclusively attached to the person of the creditor. However, the subrogated party is only entitled to legal interest from the date of a formal notice, if he has not agreed a new interest with the debtor. This interest is guaranteed by the securities attached to the claim,…

The debtor may invoke subrogation as soon as he is aware of it, but it may not be set up against him unless he has been notified of it or has taken note of it. Subrogation may be set up against third parties as soon as payment has been made. The debtor may set up against the subrogated creditor the defences inherent in the debt, such as nullity, the defence…