Cashing a check when your customer includes "conditions" and "paid in full" on the back
By Michael C. Dennis MBA, CBF, LCM and Stephen Kozack

Question: We received a check and a letter from one of our customers. The letter said, in part:

"While our records differ from yours with respect to the balance owed, we are submitting the attached check as payment in full, in full and final satisfaction and settlement of outstanding invoices and balances owed or allegedly owed by Customer Name to Vendor Name.

By cashing this check, you agree this payment of $x,xxx.xx shall be a full and final settlement. Furthermore, Vendor Name agrees to irrevocably and unconditionally release, renounce and discharge Customer Name from any and all future actions, suits, debts and claims relating to the disputed balance due."

The back of the customer's check contained the words: "Payment in full satisfaction of the disputed claim."

I can guess, but what exactly is the customer trying to do?

Answer: Based on the information provided, it appears that the customer is trying to get you to accept a partial payment in full settlement of a disputed balance. You should be aware that State laws govern the presentation of checks in full satisfaction of disputed balances. For example, in California the debtor must have a good faith and bona fide dispute with the creditor ---- and the statement that the partial payment is being tendered to the creditor in full satisfaction of the disputed balance must be clear and conspicuous.

Assuming there is a legitimate dispute, depositing the check could signal your acceptance of the debtor's payment as full payment of the disputed balance. I suggest you discuss your options with an attorney.

Steven Kozack is a business consultant that specializes in helping companies organize their credit operations and make them leaner and more efficient. Please send your questions to Steven at: skozack@coveringcredit.com