By Karen Ensley, Ensley Benitez Law, PC
The job is finally done. You know the one I mean. The Owner/GC/Architect changed their mind/the scope on an almost daily basis, complained about everything, delayed completion. Now it’s time to get paid and instead of a check for the $35,000 that you’re owed, you’re handed a check for $10,000 with a note in the memo section – or maybe on the back – that says payment in full. What do you do?
Most people believe that the “note” is not enforceable, that they can take what they can get now and pursue the balance later. Unfortunately, with few exceptions, depositing a check with a payment in full notation on it waives the right to pursue any further payment on the account. Nor can you simply strike through the notation and deposit the check.
The technical term is accord and satisfaction. The requirement is a payment obligation for an uncertain amount or one which is disputed in good faith, a good faith tender of less than the full amount of the claim, and the tendered funds changing hands via the tendered instrument (check, money order, etc). This process would not apply, of course, to wire transfers since it’s the act of “knowingly” accepting the less than full amount that triggers the accord and satisfaction defense.
Anyone responsible for obtaining payments and depositing them into a checking account needs to carefully review the check and compare the check amount against the balance owed. If there’s any question about the intent of the payer, the check should NOT be deposited since it is the act of depositing, not the act of taking possession of the check, that triggers the rule.
If a payment has been accepted in error, if it can be unwound, there’s a short window of opportunity in which to do so. As well, what constitutes a good faith dispute and what your options are if you inadvertently accept a check tendered in full satisfaction of a debt are technical in nature and fact specific, so consult an attorney if you have questions.
Ensley Benitez Law, PC
12222 Merit Dr, Ste 900
Dallas, Texas 75251