Cashing a check when your customer includes "conditions" and "paid
in full" on the back
C. Dennis MBA,
CBF, LCM and Stephen Kozack
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?
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
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: firstname.lastname@example.org