"Paid in Full!" - because I said so.

 

Another urban myth, clarified.

 

 

 February
2014 Edition

 

Real Estate   Business   Litigation   Bankruptcy

    (MSBA Certifed Specialist) 

  

 

 

Taking a detour from the "Pop Culture Law 101" course this month. Every couple years I get another question about an account debtor who wrote "paid in full" on a part-payment check and thinks they've tricked the merchant into cancelling the rest of the debt. It's not a completely bogus theory, but it's not that easy either. Grab an energy drink and read on. - Steve

peerless fan 

 

 
A big fan of - debunking urban legal myths.

 

What part of "Paid in Full" don't I understand?  
 

Simple question.  If a customer writes "paid in full" on their check and the merchant cashes it, did the merchant just forgive the unpaid balance?  Seems like a bunch of people believe it, anyway. Simple answer - probably not, but perhaps yes.

 

The concept is called "accord and satisfaction", and it's codified in Minn.Stat. 336.3-311.  An "accord" is an agreement; a "satisfaction" is the full performance of one's obligation under the agreement.  There is some nitty-gritty, but here's the crux.

 

IF the customer tendered the check in good faith (i.e., not trying to trick the merchant) to settle a bona fide dispute over the amount due, AND IF the merchant knew the customer was tendering the check for that purpose and cashes the check, THEN the unpaid balance is deemed discharged.  The check (or an accompanying note) must conspicuously state that the check is offered as full satisfaction.   If all those "ifs" are true, then the customer has a case.

 

But note, two other components also help protect the merchant.  First, if the merchant identified a specific person or office to which any such compromise offers must be tendered, then an accord and satisfaction can only be made if the customer complied.  This helps prevent surprise "settlements."

 

Second, if the surprised merchant refunds the payment within 90 days of cashing the check, there is no discharge.  (This exception doesn't work if the merchant identified an agent to receive compromise offers, and that agent accepted/cashed the check.)

 

As is always true, specific facts and circumstances can put spins on the analysis and may evoke other legal theories.  But that's what makes law SO intriguing. 

 

Speaking of which - since the reality TV industry seems to be competing for ways to turn the most boring of human pursuits into wildly successful cable programs, I'm thinking about a concept show featuring REAL suburban real estate lawyers and the racy side of their competitive practices.  Lively debates over the benefits of registered property; reckless  disregard for empty staplers; ruthless interpretations of restrictive covenants.  Captivated yet?

 


Let me know if you have questions or comments about these topics or others. 

Visit my website, www.lodgelawoffice.com, to read more about me, my practice and areas of law that are relevant to you and your business.
Sincerely,



Steve Lodge, Esq.
Steven J. Lodge, PLLC

2006 First Avenue N, Ste. 201

Anoka, MN 55303

(763) 427-9066 (main line)

(763) 205-3058 (direct line)

(763) 447-3627 (fax)

steve@lodgelawoffice.com

 

 

Nothing in the email is intended to constitute legal advice.  The contents of this message are only a cursory description of general concepts in typical real estate or business transaction settings.  Your individual situation may not be consistent with these descriptions.  You should consult with an attorney who focuses his/her practice on the relevant subject matters before acting on any information you read here.