A customer disputes your claim for extras in some change orders you’ve submitted. You explain that the scope of the contracted work has been changed, but the owner isn’t seeing it your way. You complete the punch list work and receive a check—marked “payment in full” in the memo line—for less than the invoiced amount, along with a letter from the homeowner explaining his position. You wonder: If I cash the check, will I still be able to make a claim for the unpaid balance?
Unfortunately, in many jurisdictions, the answer is no. When parties mutually intend to settle an existing dispute regarding an amount due by accepting a certain payment amount (such as a check marked “payment in full”), then that payment will result in the discharge of the prior disputed obligation (an “accord and satisfaction” in legal terms). One court found that a claim for additional payment wouldn’t be allowed even though the claimant wrote on the marked check that he reserved his right to further payment. That said, a customer cannot simply claim that partial payment constitutes payment in full for a project halfway through a job and expect the contractor to fully perform the balance of the contract.
The lesson is clear: When a dispute arises and a customer marks a check “paid in full,” the best practice—especially when the check is accompanied by a letter explaining why it is to constitute full payment—is to avoid cashing the check and attempt to resolve the dispute for the correct amount or an agreed-on lesser amount. Simply cashing the check and expecting you can argue about it later would be a big mistake.
Alexander Barthet (firstname.lastname@example.org) is a principal of The Barthet Firm, a 12-lawyer commercial law practice focusing on construction-related matters.
This article is for informational purposes only. It is not intended as legal advice. Consult an attorney before taking any action.