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This is done in order to attempt to avoid paying the full amount and are sent under cover of a letter which states that the amount is proffered in full and final settlement of all your claims.

In this article we consider the issue of whether retention or cashing of a cheque amounts to acceptance of the amount in full and final settlement and therefore barring yourself from a further claim?

Although there are more recent cases, the key Court of Appeal case dealing with the situation where a creditor cashed a debtor`s cheque, which had been sent  in full and final settlement of a larger sum, is Stour Valley Builders v Stuart.

In this case, following the previous authority of Day v McLean, it was held that keeping a cheque offered in full and final settlement of a larger amount was not, as a matter of law, conclusive that there was an accord and satisfaction (i.e. acceptance) of the claim. Rather, it was a question of fact on what terms the cheque was kept.

Referring to Stour Valley Builders v Stuart the Judge’s opinion was “As with any other bilateral contract, what matters is not what the creditor himself intends but what by his words and conduct he has led the other party as a reasonable person to believe”.  In addition he said “cashing” the cheque is always strong evidence of acceptance especially if it is not accompanied by immediate rejection of the offer.

What does this actually mean?  As with a lot of these things, there is no straight forward answer, as the case law does not stipulate any hard and fast rules, but the principle looks at least to have been decided and that timing plays a key part where the receiving party may be required to respond quickly.

It is reasonable to assume that the act of cashing the cheque does not, in itself, mean that you would be treated as having accepted the amount as full and final settlement. The primary issue relates to the delay between receipt (and cashing) the cheque and communicating the fact that it was not accepted as full and final settlement.

Communication of the rejection must occur “within a few days” for it to be valid. In the case Stour Valley Builders v Stuart a delay of one week fell within this band.  In another case, a delay of seven weeks was found to be too long and accord and satisfaction was established.

It appears therefore, that the deciding factor is whether the creditor’s conduct, i.e. delay, caused the debtor to think that the cheque was accepted in satisfaction.

If you should receive a cheque  is sent in full and final settlement of a larger sum,  reply quickly by clearly stating that the cheque is not accepted in full and final settlement but will be accepted and applied in part-payment of the full debt. 

Safer still would be to hold the cheque while you write back to the debtor and advise them it is only accepted as part settlement and will be cashed on that basis in 7 days. In the absence of any response or objection it would then be appropriate to cash the cheque.

For further advice on this issue or if you need help with debt collection please speak to us.

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