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Submitted by DakotaLegal on
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Submitted by DakotaLegal on
This client’s use of a check is one of the most common areas of dispute in collections. The answer varies from state to state, and Virginia tends to be on the side of the party who writes this kind of “settlement” offer on a check. At any rate, in Virginia the key word is “dispute.” Once it's clear there’s a dispute, this kind of language is crucial. Sometimes, reality intrudes, and a business (especially when it’s been months) needs the cash. In the meantime, have you considered filing a materialman’s lien? http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+TOC43000000001000000000000.
Now about taking that check…you want to be able to honestly say that there’s a continuing dispute about what is owed, and that the amount on the check is still disputed. In other words, the best outcome would be for you to be able to cash the check while keeping the right to sue for the disputed balance. That’s where we’ll try to get, but it’s risky and unlikely based on what you’ve said. So keep in mind, to be absolutely on the safe side and protect your rights to the total debt, you will (a) not want to cash the check with the “Paid In Full” language, and (b) will sue for the full amount and costs and interest in court, using the check as evidence.
The answer is going to come from the Virginia Uniform Commercial Code, or “UCC.” http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.3A-311. Virginia courts have clearly interpreted the UCC rule when there’s a note on the check saying this is an “accord and satisfaction” and a letter saying something such as this is “my last offer.” That doesn’t seem to apply here, since there’s no mention by you of having gotten a letter along with the check. One court noted a check with the same language used here (“full payment”) and a letter was enough proof of being “in effect, a drop-dead letter that says, ‘This is it. This is all we’re going to pay you.’ ” In the same case, there was no evidence (the court said) that the person who cashed the check had reason to misunderstand what “This is it…” meant.
You can try to argue that language on the check (“Paid In Full”) was rejected by you. But in another case, the person getting and cashing the check actually crossed out the “Paid In Full” wording, and wrote over it “NO….” and listed the disputed balance on the check. The trial court ruled in favor of the business person cashing the check, but then the appeals court reversed, saying it was a final accord and satisfaction.
So far, you can see it’s been hard to be able to cash a check and still sue.
It’s possible to argue that your client did not act in “good faith” when they sent you the check. One recent case showed that it’s important the check is clearly marked, addressed to the correct person, and is not an effort to deceive anyone into taking a check as a final settlement. For example, if your client had reason to know one of your workers might cash the check (but you wouldn’t), then there might be a lack of good faith. http://caselaw.findlaw.com/va-supreme-court/1471668.html.
The last effort is to try and push back against the client’s language. What if you wrote on the check, “Accepted as Partial Payment Balance due $XYZ.00” ? That has also been tried, and the General District Court in that case also ruled against letting the check be used as a partial payment. http://caselaw.findlaw.com/va-supreme-court/1435336.html. The bottom line is that your client’s offering the check will be seen as an offer to settle. If you cash the check, you’ll have a hard time proving you didn’t know it was just such an offer. On the other hand, I hope your use of invoices is including an obligation to pay costs, including interest and attorney fees. The General District Court (Virginia’s small claims court) has a $4,500 limit. http://www.courts.state.va.us/courts/gd/home.html.
This client’s use of a check is one of the most common areas of dispute in collections. The answer varies from state to state, and Virginia tends to be on the side of the party who writes this kind of “settlement” offer on a check. At any rate, in Virginia the key word is “dispute.” Once it's clear there’s a dispute, this kind of language is crucial. Sometimes, reality intrudes, and a business (especially when it’s been months) needs the cash. In the meantime, have you considered filing a materialman’s lien? http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+TOC43000000001000000000000.
Now about taking that check…you want to be able to honestly say that there’s a continuing dispute about what is owed, and that the amount on the check is still disputed. In other words, the best outcome would be for you to be able to cash the check while keeping the right to sue for the disputed balance. That’s where we’ll try to get, but it’s risky and unlikely based on what you’ve said. So keep in mind, to be absolutely on the safe side and protect your rights to the total debt, you will (a) not want to cash the check with the “Paid In Full” language, and (b) will sue for the full amount and costs and interest in court, using the check as evidence.
The answer is going to come from the Virginia Uniform Commercial Code, or “UCC.” http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.3A-311. Virginia courts have clearly interpreted the UCC rule when there’s a note on the check saying this is an “accord and satisfaction” and a letter saying something such as this is “my last offer.” That doesn’t seem to apply here, since there’s no mention by you of having gotten a letter along with the check. One court noted a check with the same language used here (“full payment”) and a letter was enough proof of being “in effect, a drop-dead letter that says, ‘This is it. This is all we’re going to pay you.’ ” In the same case, there was no evidence (the court said) that the person who cashed the check had reason to misunderstand what “This is it…” meant.
You can try to argue that language on the check (“Paid In Full”) was rejected by you. But in another case, the person getting and cashing the check actually crossed out the “Paid In Full” wording, and wrote over it “NO….” and listed the disputed balance on the check. The trial court ruled in favor of the business person cashing the check, but then the appeals court reversed, saying it was a final accord and satisfaction.
So far, you can see it’s been hard to be able to cash a check and still sue.
It’s possible to argue that your client did not act in “good faith” when they sent you the check. One recent case showed that it’s important the check is clearly marked, addressed to the correct person, and is not an effort to deceive anyone into taking a check as a final settlement. For example, if your client had reason to know one of your workers might cash the check (but you wouldn’t), then there might be a lack of good faith. http://caselaw.findlaw.com/va-supreme-court/1471668.html.
The last effort is to try and push back against the client’s language. What if you wrote on the check, “Accepted as Partial Payment Balance due $XYZ.00” ? That has also been tried, and the General District Court in that case also ruled against letting the check be used as a partial payment. http://caselaw.findlaw.com/va-supreme-court/1435336.html. The bottom line is that your client’s offering the check will be seen as an offer to settle. If you cash the check, you’ll have a hard time proving you didn’t know it was just such an offer. On the other hand, I hope your use of invoices is including an obligation to pay costs, including interest and attorney fees. The General District Court (Virginia’s small claims court) has a $4,500 limit. http://www.courts.state.va.us/courts/gd/home.html.