By Robert P. Gates
Attorney At Law, Erskine & Tulley
For more information, email bob [at] erskinetulley [dot] comHere’s a little legal tidbit which business owners should know about.

Writing “Full Payment” or “Paid in Full” on the back of a check (above where the payee would endorse) does NOT result in a settlement for less than the full amount if the creditor strikes out or deletes the words before cashing the check. Civil Code Sec. 1526(a): 1526.

(a) Where 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 or draft, the acceptance of the check or draft does not constitute an accord and satisfaction if the creditor protests against accepting the tender in full payment by striking out or otherwise deleting that notation or if the acceptance of the check or draft was inadvertent or without knowledge of the notation.
(b) Notwithstanding subdivision (a), the acceptance of a check or draft constitutes an accord and satisfaction if a check or draft is tendered pursuant to a composition or extension agreement between a debtor and its creditors, and pursuant to that composition or extension agreement, all creditors of the same class are accorded similar treatment, and the creditor receives the check or draft with knowledge of the restriction.”
Now, having said that, it works both ways. It can protect you as a creditor if you receive a partial payment and want to take it, but not forgive the balance. If you owe the money, it is still worth a try to put something like that on a check and see if your creditor crosses it out.

Much more can be said and there is an article if you are interested.

Paid In Full