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The “In-Full-Payment” Check Situation

15 January, 2016 - 09:32

To discharge his liquidated debt for $8,000 to the surgeon, the patient sends a check for $6,000 marked “payment in full.” The surgeon cashes it. There is no dispute. May the surgeon sue for the remaining $2,000? This may appear to be an accord: by cashing the check, the surgeon seems to be agreeing with the patient to accept the $6,000 in full payment. But consideration is lacking. Because the surgeon is owed more than the face amount of the check, she causes the patient no legal detriment by accepting the check. If the rule were otherwise, debtors could easily tempt hard-pressed creditors to accept less than the amount owed by presenting immediate cash. The key to the enforceability of a “payment in full” legend is the character of the debt. If unliquidated, or if there is a dispute, then “payment in full” can serve as accord and satisfaction when written on a check that is accepted for payment by a creditor. But if the debt is liquidated and undisputed, there is no consideration when the check is for a lesser amount. (However, it is arguable that if the check is considered to be an agreement modifying a sales contract, no consideration is necessary under Uniform Commercial Code (UCC) Section 2-209.)