An increasing number of cases deal with the attempts of
debtors to avoid or decrease debts through use of these types of cheques. There
is a dilemma, especially if the dispute has been ongoing for a considerable
period of time, to cash the cheque and pursue, anyway, for the remaining
amount. But the trouble is by cashing the cheque, are you then binding yourself
to the agreement that the cheque provided is for full and final settlement and
therefore barring yourself from further claim?
The case law certainly suggests, that like all things in law
that: “it depends”. It depends, very much, on the circumstances, background and
the intentions of each party. In other words, the courts have been fairly reluctant
to put into place any concrete rules.
The major difference in treatment in these cases or at least
probably the only one worth mentioning is when a debt is disputed or
undisputed.
The debt was undisputed in the case of D and C Builders v
Rees, where the plaintiff was entitled to recover the balance of the sum owed
as the cheque offered in “settlement” was nothing other than a means by which
the claimant sought to avoid the price of the works carried out because they
had been carried out with no complaints.
Another factor in determining whether cashing such a cheque
can be binding is time. In Bracken and Another v Billinghurst, the time taken
for the creditors to indicate their non acceptance of the cheque as full and
final settlement proved a deciding factor. The courts felt that too long a
period of time had lapsed without having informed the defendants of their
intentions and therefore deemed the acceptance of the cheque in full
settlement.
In a disputed debt claim, reliance is placed on the case of
Day v McLea, whereby an agreement to accept a cheque
in full and final settlement will be heavily based upon the conduct of the
creditor. So in Inland Revenue Commissioners v Fry, where the creditors
had no idea that the cheque they received was in consideration of full and
final settlement were entitled to pursue for the remaining balance.
There are two options for the creditor with the main lesson
to be learned from case law is clarity. If you are explicitly clear (when
banking the cheque) with your intentions of non acceptance, don’t dilly or
dally, do nothing that could be construed as acceptance and notify the debtor
straight away of your disagreement to the lesser amount - do this and the courts
will likely look upon this favourably on the basis that there has been no consensus
in idem to constitute a binding agreement. At the very least immediately write
to the other party that you are rejecting the cheque as full and final
settlement but will be cashing the cheque as part payment. Be sure to keep a
copy of this letter and send by reliable source to the correct address. The
temptation is, understandably, high to bank the cheque and pursue for the
remaining balance but alongside the requirement of clarity; it may be that the
best solution would be to reject the cheque altogether and advise the debtor
that full payment is to be made within a short period of time, failing which
will result in court proceedings. This way, the debtor has no claim against
you.
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