Legal Question in Credit and Debt Law in California
Check cashing restriction and legal binding contract
If I write on the memo section of a check: ''Payment in full for file #... and the name of the merchant'' and also, if I write on the reverse side of the check: ''The cashing of this check constitutes payment in full for debt file #... and name of merchant and the name of the collection agency'' is this legally binding if the merchant accepts and cashes the check? Does the merchant have any right to sue and try to collect more money on disputed amounts; more than the amount of the check? I believe the cashing of the check constitutes payment in full and that no other amount is due. If I also include a letter with the check, disputing excessive charges, is the cashing of the check evidence that the terms were accepted by the merchant?Please send me the civil or federal code or the name of the law book where I may read any law that refers to this situation and collection agencies.
1 Answer from Attorneys
Re: Check cashing restriction and legal binding contract
Your question depends on the interpretation of California Civil Code section 1526.
This section generally states that "when a claim is disputed or unliquidated and a check or draft is tendered by the debtor in settlement thereof in full discharge of the claim, and the words "PAYMENT IN FULL" or other words of similar meaning are notated on the check, the acceptance of the check does not constitute an accord and satisfaction if the creditor protests against accepting the tender in full payment by striking out the notation or if the acceptance of the check was inadvertent or without knowledge of the notation."
Under your scenario, you might just get away with creating a defense to any further collection attempts if the check is cashed without striking out the wording. Good luck.
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