Cheques sent in Settlement: Show me the Money
It is common for creditors to receive £1 cheques (or similar) from debtors in respect for larger outstanding sums.
 
However, think twice before cashing in these cheques. In Stour Valley Builders v Stuart (1992), when a cheque was banked for a lesser amount than the creditor was claiming, it would be accepted in full and final settlement so long as the creditor did not inform the debtor, either at the time the cheque was presented (or shortly thereafter) that he does not accept it in full and final settlement. Consequently, if he fails to do so he will be regarded as having accepted the amount stated on the cheque.

In Day v McLea (1889), the Court of Appeal held in similar circumstances that keeping the cheque was not, as a matter of law, conclusive that there was an accord and satisfaction of the claim, but it was a question of fact on what terms the cheque was kept.

Cashing a cheque is always strong evidence of acceptance, especially if it is not accompanied by an immediate rejection of the offer. Retention of a cheque without rejection is also strong evidence of acceptance, depending on the length of the delay in notification of rejection. The key is to make it clear that the cheque is being accepted as payment of part of the debt only, not in settlement of it.

Timing is the key as in Bracken v Billinghurst (2003), when two weeks had lapsed before the employer cashed the cheque. He then wrote to the contractors rejecting the offer in settlement and furthermore would pursue for the total award. The court held that this was too long a period for it to have held the cheque and not informed the other party of its intentions. This delay (combined with the clear terms set out in the accompanying letter) meant that there has been accord and satisfaction.

Dee Kundi – Solicitor, Commercial Dispute Resolution & Litigation, Birmingham