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Full PaymentYour company ships and invoices for $10,000 for goods sold and delivered. You receive in response a check in the sum of $7500 marked “full and final payment” with a note from the customer, “Some of the goods were not specifically what I ordered. I don’t think it’s fair that I should have to pay the full $10,000. Here’s $7500; let’s call it a day. The check is marked ‘Full and Final Payment.’” Should you accept that check? Should you return it? There is a third alternative.

To be sure, if the check is endorsed without any restrictions and deposited into your company’s account, that’s the end of the story. It would be deemed to have been an “accord and satisfaction” of the debt. If you return the check, it may be a long time before you see any funds from the customer. The third alternative is to restrictively endorse the check “under protest, without prejudice, and with full reservation of rights.” Do not cross out the “full and final payment” language, for if you do so the court will still look upon your having accepted the check as a final payment. If, however, you specifically endorse as indicated above, you will have reserved your rights to sue for the balance due. That is, even after negotiating the $7500 check, you can pursue the customer for the additional $2500, but only if you have restrictively endorsed the check as indicated. All of the foregoing is provided for under UCC 1-207 – a very valuable tool.

For further information on this and other valuable tools, call Les Taroff or Elliott Portman.

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