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If a check contains a memo such as paid in full, is the debt considered paid if the payee deposits the check

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Anonymous Contractor

Hypothetical. Mr A owes Mr B $ 5,000. He issues a check payable to Mr B for $4,000. The check contains a notation stating balance paid in full. Is Mr A responsible for the balance, or in fact is it paid in full ?

1 reply

Levelset Admin at Levelset
| 330 reviews
Jan 3, 2020
This is a tricky situation. For the most part, a check that reads "paid in full" or "final payment" could potentially have some effect on the ability to recover the remaining balance. If the parties are in dispute over the amount due, then accepting and cashing a check could be deemed a settlement which discharges the amount in dispute. This is legally known as "accord and satisfaction." Clearly, if other progress payments are due on a project, accepting a paid in full check won't affect future payments due under the contract. But given the potential troubles with this practice; it's best to avoid the temptation. Maintaining cashflow on a construction project is always a problem, but cashing a "paid in full" check now, and disputing it later could be a costly error. For more reading: Are checks with "payment in full" in the memo legally binding? Do they affect mechanics lien rights?
NOTE. The information presented here is for informational purposes only. It is not legal advice and should not be construed nor relied upon as such.
Furthermore, this posting does not create an attorney-client relationship. If you need legal advice, seek the counsel of a licensed, local attorney.See More...
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