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Should You Cash That Check? The Virginia Supreme Court Weighs in on Accord and Satisfaction.

Think twice before you accept a check tendering only partial payment!  In a recent case, Helton v. Phillip A. Glick Plumbing, Inc., [pdf], the Virginia Supreme Court ruled for a homeowner who had repeatedly disputed his plumbing company’s charges and argued that his bill was excessive. The homeowner wrote his last check for  $1300 -- $1686.51 less than the final invoice -- and included the words “paid in full” in the memo line of the check.  He sent the check with a letter raising yet again the issue of overbilling and wasted time and materials, and said that he would make no more payments.  The plumbing company cashed the check, crossing out “paid in full” and writing “No” and “balance due $1686.51.”

Looking at Virginia Code Section 8.3A-311 [pdf], an amendment to the Uniform Commercial Code adopted in 1992, the Court reviewed the following elements that a debtor must prove to establish accord and satisfaction by use of an instrument: (1) the debtor tendered an instrument in good faith as full satisfaction of the claim; (2) the amount of the claim was unliquidated or subject to a bona fide dispute; and (3) the claimant obtained payment of the instrument.  Under that code section, the claim is discharged if the debtor shows the instrument, or an accompanying written communication, contained a conspicuous statement showing that the instrument was tendered as full satisfaction of the claim.

The Court had no problem concluding that the homeowner tendered the check intending the bill to be satisfied in full, that the final invoice was subject to a bona fide dispute, and that the plumbing company cashed the check. The Court ruled that the claim was discharged because the homeowner clearly marked “paid in full” on the check and sent a letter with the check outlining the repeated complaints of overbilling.  The language added by plumbing company before cashing the check only verified the company’s knowledge of the dispute and that the homeowner gave a “conspicuous statement” that he tendered the check as full satisfaction of the claim.