When A Check Becomes a Release
Few things are more welcome to a contractor than receipt of a check for work performed. But what if the check states it is full and final payment, and the contractor does not regard it as final payment; or the check states cashing the check releases all remaining claims, and the contractor is not willing to release all unpaid claims. May the contractor in these circumstances retain the check and still pursue his unpaid disputed claims?
Whether the contractor may safely cash the check depends on what is being paid. If the party providing the check (the payor) is paying only an amount he admits is due, accepting that check will not result either in an accord and satisfaction, or a release, no matter what words are included on the check. The contractor may cash the check and still keep his legal right to pursue remaining unpaid claims. There can be neither an accord and satisfaction, nor a release, without legal consideration. A party who pays an amount he admits is due provides no consideration to support a binding settlement or release of disputed claims.
However, the result is different if a check, (which states it is full payment or a release), includes an amount greater than the payor admits is due. The additional amount tendered in this circumstance makes it an offer of settlement. If accepted, that additional amount may provide the legal consideration necessary for enforcement of an accord and satisfaction or a release. The contractor accepts the offer of settlement by cashing the check, the effect of which may be the release of all unpaid claims.
A contractor may protect himself in one of two ways. The first and safest is to return the check with a statement that you are unwilling to release unpaid claims based upon the amount tendered. That statement should be accompanied by a demand for payment of all undisputed amounts. The second is to retain the check without cashing it, and to notify the payor that (a) you do not accept the amount tendered as full payment, (b) you will deposit the check in a week or two with all restrictions on the check stricken, (c) you will apply the check to unpaid invoices and (d) if the payer disagrees, he may stop payment on the check in the meantime.
You may also notify the payor that withholding amounts which are due to pressure a surrender of disputed claims is an unfair act or practice in direct violation of c. 93A, §11, which could lead to an award of multiple damages (see Construction Law Comments - Fall 1992).
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