Commercial Collections Blog

Cashing a Check with “Payment in Full” language

What to do if you receive a payment from a debtor with the words “acceptance of this check denotes payment in full”?  The answer varies based on State law and the facts of the situation.

NOTE:   You cannot cross out the language and write “under protest”.

Two primary issues is determining if you should cash the check are:

1. Is there a dispute between the parties regarding the amount owed?

2. Whether a “satisfaction of a debt” exists (they are offering to pay a lesser amount).

When there is a dispute between parties regarding the balance owed — the debtor can offer a lesser amount as full payment. If the creditor accepts the offer — this is referred to as an “accord and satisfaction”.

It should also be noted that some courts have held that when, in ignorance,  a creditor’s accounting department cashes a debtor’s check (that it was an attempt to “accord and satisfaction”).  A subsequent & timely protest by the creditor may result in defeating the “accord and satisfaction”.

Note: In some states, when a claim is disputed and a check is offered for settlement, the retention of the check constitutes “accord and satisfaction” — regardless of any protest by the creditor.


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