If A borrows from B, A now owes B
Then C shows up and pays B with the agreement that it settled A’s debt to B.
A does not know any agreement was made but the original A owes B
A goes to pay B.
B says A doesnt owe B.
C says A owes C
But A did not make an agreement that he owed C.
How does A owe C now?
It seems to me that: C gave A the gift of settling A’s debt to B.
In: Economics
First of all, going waaaay back to the very earliest uses of writing in Mesopotamia, people have found it useful to handle debts by writing them down. Instead of A making a verbal agreement with B to borrow some money, in exchange for some cash A signs a note saying they’ll pay back X amount of money to B.
Now, lenders find it useful for many reasons to be able to sell debt. So when A goes around looking to borrow money, he will wind up signing a note that says “I owe the owner of this note money” not “I owe B money”. Why would he do this? Well, it’s all the same to him, and also he can probably get a better rate, people would charge extra if he insisted debt couldn’t be transferred.
And since that’s what the note says, that’s what the agreement means. The money isn’t owed to B, it’s owed to the owner of the note, so B can sell it to C.
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