When cashing a check results in full satisfaction of a claim
You have a dispute with someone concerning how much you owe him. After negotiations you reach an amount that is acceptable to both of you. You pay that amount and later you get a bill for the balance. You are outraged. Unfortunately you have no proof that the amount you paid was agreed to by the other side as a compromise of the claim. You are back where you started and you have to renegotiate with your creditor.
The law provides for a quick method of proving that you have indeed reached a compromise. On your check, if you write clearly that the check is being issued in full settlement of the debt, you have placed the creditor on notice that you are tendering the amount of the check to resolve all amounts asserted owing by the creditor. Language such as “paid in full” or “in full satisfaction” will be considered clear and unambiguous expressions of your intention to settle the debt and, if the check is cashed by the creditor, will result in the compromise of the claim for the amount paid.
If the creditor determines that he does not want to settle for the amount tendered, he must return the check to you un-cashed or, if the check was cashed, tender the amount of the check back to you within 90 days after payment of the check. By doing either of these things the creditor is stating that he does not agree to the compromise and the claim is not settled.
Next time you reach an agreement to settle a debt for less than the face amount you can protect yourself from future claims regarding the same debt by writing the creditor a clear and unequivocal communication that the amount you are paying is a full settlement of his claims.
