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A popular method of attempting to resolve a disputed claim is for one person to write a check to another with the added notation "payment in full." The question arises whether cashing a check with this notation fully extinguishes the check-writer's obligation to the check recipient. The answer to this question varies, depending largely on two factors. First, if more than one obligation exists between the two parties, and it is unclear which obligation(s) the check was intended to cover, the "payment in full" notation will be ineffective. For example, if your plumber sends you two separate bills, one for $80 and one for $95, and you return a check for $65 marked "payment in full," the notation probably will have no effect. A reference on the check to a specific invoice, however, may cure this problem. A second factor to be considered in determining the effectiveness of the notation is whether the amount owed is precise and whether there is a genuine dispute regarding it. The law will not permit a dispute to be manufactured simply by the addition of the "payment in full" notation on a check. If you borrow $500 in cash from a friend with a promise to repay it in 90 days, your "payment in full" notation on a check to him for $300 probably would not prevent him from pursuing you for the remaining $200. The claim never was in dispute. Arizona law is designed to encourage compromise and settlement of disputed claims. The "payment in full" notation is a simple method of documenting a settlement. The law will not, however, permit unfair results. The notation generally is effective only when the claim to be discharged is clearly identified and genuinely in dispute. If someone owes you money, but the amount is in dispute, the other person may choose to strike a balance between the amount he says he owes and the amount you claim is owed. He may do this to compromise the matter before it gets out of hand. If he writes "payment in full" on his check to you, it would be unfair to allow you to cash it, then pursue him for an additional amount. His offer may have been lower had he known the dispute would continue. A "paid in full" check is a way to propose a compromise. Cashing the check is the way to accept the compromise. |