Legal Question in Business Law in California

Re: Breach of Contract

First, did you know that most claims against the state government or its branches such as cities, counties, special districts, etc. require adherence to a special procedure requiring advance notice to the prospective defendant, specifying the details of the contract or tort claim to be made? See Government Code sections 900 and following sections. The Small Claims Court can reject your claim at the city's request if you haven't followed the so-called Tort Claims Act (which despite its name also applies to contract claims).

One law regarding "payment in full" checks is found in Civil Code section 1526. It is a part of a more general set of provisions covering "accord and satisfaction." Under CC 1526, you could have crossed out statements like "payment in full" on the check, and also putting "payment in full" on the stub would have been insufficient. So, you'd have been protected two ways.

However, California more recently passed a substantially conflicting law as part of the Commercial Code - it is Commercial Code section 3311 - that allows the "payment in full" language to be an an accompanying letter or memorandum instead of requiring it to be on the check, and also does not allow the payee/creditor to delete the language and accept the check! So, under the CC 3311 language, you'd forfeit your right to sue for more if you cashed the check (there is a savings provision that could allow you to refund the amount of the check and still pursue the entire claim).

There are a couple of appellate decisions that say the later law has the effect of repealing conflicting provisions of the earlier law.

Therefore, my advice is NOT to cash the check, unless you decide that compliance with the Tort Claims Act and the risks of suit give you reason to change your mind and accept the lesser amount. After all, the court might award you less, or nothing at all.