I owe a creditor some money.  On the phone, the creditor agreed to
settle this debt for 60 cents on the dollar.  On the back of my first
payment I wrote:

"Cashing of this check shall serve to confirm that creditor agrees to
consider this debt as paid in full upon receipt of a total of $13,987
from debtor".

If they cash the check, do I have now have an enforceable settlement agreement?

Thanks

---

Request for Question Clarification by denco-ga on 05 Sep 2005 13:01 PDT

It might help researchers to know the state of your location, and the
location of the creditor.  Thanks!

---

Clarification of Question by dollyandlucy-ga on 05 Sep 2005 20:37 PDT

I (the debtor)am located in California.

The creditor is Chase Manhattan (I'm not sure where they are headquarted officially)

---

Request for Question Clarification by denco-ga on 06 Sep 2005 11:11 PDT

Howdy dollyandlucy-ga,

A reminder of the "Important Disclaimer: Answers and comments provided on
Google Answers are general information, and are not intended to substitute
for informed professional medical, psychiatric, psychological, tax, legal,
investment, accounting, or other professional advice."

As California code appears to have contradictions, I am going to post this
as clarification request to see if it addresses your question sufficiently.

What you are talking about is called a "restrictive endorsement" and it can
be enforceable, but depends on state code, and the the process that one
takes to inform the creditor of the restrictive endorsement.

The Carreon & Associates web site describes restrictive endorsements.
http://www.carreonandassociates.com/articles/4settle.htm

"Normally you add a section of fine print to the back of the check stating
'Cashing of this check constitutes your acceptance of my restricted offer.
Any and all future claims for this debt are null'."

Earlier on the same page, though, they describe the way to approach a
restrictive endorsement.

"This is called a restrictive endorsement where you first send a letter
offering to pay the debt at a discounted amount with certain terms (i.e.:
total deletion) and then follow up with a cashiers check and another letter
advising that their cashing of this check constitutes the agreement ..."

CreditConnectUSA.com has some sample letters that could be modified to meet
the procedure outlined above.
http://www.creditconnectusa.com/sample_letters_home.htm

"Agreement between you and your creditor to reduce your debt"

This Myers, Widders, Gibson & Long, LLP web site "Quarterly News" article
dated July/Sept 1999 talks about the contradictions in the California code.
You should read the article in full for the details.

"Check That Check!" By Robert I. Long.
http://www.mwgjs.com/Pages/JulySept1999/newsletter.htm

"California Civil Code section 1526 ... handling a check ... containing a
restrictive endorsement such as 'payment in full'. Provided the check had
not been preceded by a letter ... the creditor could simply strike out the
restrictive endorsement, deposit the check, and it would not preclude later
collecting a disputed additional amount.

In 1992, however, California enacted commercial Code section 3311 which
generally provides that cashing a check with a restrictive endorsement is an
acceptance of an offer of accord and satisfaction, and prevents the creditor
from later attempting to collect an additional disputed amount."

The above amd other article discuss options that the creditor might have,
such as crossing out the restrictive endorsement, or writing "cashed under
protest" or refunding the amount of the check and then pursuing the whole
debt, etc.

Most of the articles on this subject are based on "payment-in-full" types
of restrictive endorsements, but the code is contradictive regardless.

The best approach, as the commenter notes, is to get a letter of agreement
from the creditor on the modified terms.  Barring that, then one could try
sending written notice, preferably with some kind of delivery verification,
and then following up with the restrictively endorsed check.

The web site of the Steven R. Lovett Law Office talks about the timing of
sending a letter to the creditor.
http://www.lovettlawusa.com/CommercialLaw.html

"The only way for a debtor to ensure that a restrictively endorsed check
will operate a complete accord and satisfaction is for that individual to
send written notice at least 15 and not more that 90 days prior, that a
check or draft will be tendered with a restrictive endorsement and that the
acceptance and cashing of that check will result in a complete settlement."

As well as the above, the codes where Chase Manhattan is headquartered,
which is in the states of New York and Illinois, might be applicable.  For
instance, if California code is applicable, then the creditor has all sorts
of ways out of the restrictive endorsement, and even if they don't utilize
those "outs" they could still litigate.

In other words, without a letter of agreement from the creditor, the
restrictive endorsement approach might not be dependable or prudent.

Another Carreon & Associates article has the following advice that should
be heeded.
http://www.carreonandassociates.com/articles/debt%20collectors.htm

"Never EVER take a collectors word."

If the above addresses your question sufficiently, please tell me, so I
can then post it as an answer.  Thanks!

Looking Forward, denco-ga - Google Answers Researcher

Howdy dollyandlucy-ga,

A reminder of the "Important Disclaimer: Answers and comments provided on
Google Answers are general information, and are not intended to substitute
for informed professional medical, psychiatric, psychological, tax, legal,
investment, accounting, or other professional advice."

California code appears to have contradictions, but the below will give
you sufficient information to beware of depending on the process you
have taken to be sufficient to the result intended.

What you are talking about is called a "restrictive endorsement" and it can
be enforceable, but depends on state code, and the process that one takes
to inform the creditor of the restrictive endorsement.

The Carreon & Associates web site describes restrictive endorsements.
http://www.carreonandassociates.com/articles/4settle.htm

"Normally you add a section of fine print to the back of the check stating
'Cashing of this check constitutes your acceptance of my restricted offer.
Any and all future claims for this debt are null'."

Earlier on the same page, though, they describe the way to approach a
restrictive endorsement.

"This is called a restrictive endorsement where you first send a letter
offering to pay the debt at a discounted amount with certain terms (i.e.:
total deletion) and then follow up with a cashiers check and another letter
advising that their cashing of this check constitutes the agreement ..."

CreditConnectUSA.com has some sample letters that could be modified to meet
the procedure outlined above.
http://www.creditconnectusa.com/sample_letters_home.htm

"Agreement between you and your creditor to reduce your debt"

This Myers, Widders, Gibson & Long, LLP web site "Quarterly News" article
dated July/Sept 1999 talks about the contradictions in the California code.
You should read the article in full for the details.

"Check That Check!" By Robert I. Long.
http://www.mwgjs.com/Pages/JulySept1999/newsletter.htm

"California Civil Code section 1526 ... handling a check ... containing a
restrictive endorsement such as 'payment in full'. Provided the check had
not been preceded by a letter ... the creditor could simply strike out the
restrictive endorsement, deposit the check, and it would not preclude later
collecting a disputed additional amount.

In 1992, however, California enacted commercial Code section 3311 which
generally provides that cashing a check with a restrictive endorsement is an
acceptance of an offer of accord and satisfaction, and prevents the creditor
from later attempting to collect an additional disputed amount."

The above amd other articles discuss options that the creditor might have,
such as crossing out the restrictive endorsement, or writing "cashed under
protest" or refunding the amount of the check and then pursuing the whole
debt, etc.

Most of the articles on this subject are based on "payment-in-full" types
of restrictive endorsements, but the code is contradictory regardless.

The best approach, as the commenter notes, is to get a letter of agreement
from the creditor on the modified terms.  Barring that, then one could try
sending written notice, preferably with some kind of delivery verification,
and then following up with the restrictively endorsed check.

The web site of the Steven R. Lovett Law Office talks about the timing of
sending a letter to the creditor.
http://www.lovettlawusa.com/CommercialLaw.html

"The only way for a debtor to ensure that a restrictively endorsed check
will operate a complete accord and satisfaction is for that individual to
send written notice at least 15 and not more that 90 days prior, that a
check or draft will be tendered with a restrictive endorsement and that the
acceptance and cashing of that check will result in a complete settlement."

As well as the above, the codes where Chase Manhattan is headquartered,
which is in the states of New York and Illinois, might be applicable.  For
instance, if California code is applicable, then the creditor has all sorts
of ways out of the restrictive endorsement, and even if they don't utilize
those "outs" they could still litigate.

In other words, the restrictive endorsement approach can not be depended
on to be or prudent to consider enforcable at face value, and certainly
with no guaranty that litigation would be prevented.

Considering the amount, if the creditor was, for instance, telling you a
lie in order to get money from you, it would not be surprising that they
would in turn deny the oral contract and then sue if you protested.

Another Carreon & Associates article has the following advice that should
be heeded, and makes for a good final word.
http://www.carreonandassociates.com/articles/debt%20collectors.htm

"Never EVER take a collectors word."

If you need any clarification, please feel free to ask.


Search strategy:

Google search on: "cashing of this check" contract
://www.google.com/search?q=%22cashing+of+this+check%22+contract

Google search on: "restrictive endorsement" contract California
://www.google.com/search?q=%22restrictive+endorsement%22+contract+California

Referenced California Uniform Commercial Code 3311
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=com&group=03001-04000&file=3301-3312

Looking Forward, denco-ga - Google Answers Researcher

By writing something on a check payment for a credit card, you will
not create any type of contract or confirmation of an agreement.  Your
check to a large bank is never signed, it is simply electronically
deposited.  Aside from the lack of signature, your check is handled by
machines and computers who do not read notes or agreements written on
the check. Do you think you could send the bank a check and write "by
depositing the check, the bank agrees to give me a corner office in
their headquarters", ofcourse not.
If you want to document an agreement you have made with a bank, make
sure that they put it in writing to you.  This will be the best proof
if there is ever a question.  Otherwise, a letter you write to them
may get lost in their shuffle.

Actually, research_help-ga, a restrictive endorsement can, and in lots of
situations does create a contract, that is, an offer that is accepted.

The so-called "lockbox" defense of "We can't be expected to look at the
back of every check." is not a defense at all.  As well, an electronic or
implict signature, in the form of depositing the check, is a signature
nonetheless.

This Credit-to-Cash article, "Restrictive Endorsements on Checks" has more.
http://www.credit-to-cash-advisor.com/news_228.html

"However, depositing a check bearing restrictive language may result in a
loss of your right to pursue the customer for any additional money.
...
If you use a lockbox for customer payments, you should conspicuously
designate in writing an office outside of the normal check-processing unit
to whose attention restrictively endorsed checks must be sent."

You are absolutely right that the best thing to do is to get a letter of
agreement from the creditor expressly outlining the new terms of the
contract or debt.  Even that might not be enough, because I have read of
situations where the creditor in turn litigates by saying the person who
agreed or signed the letter were not authorized to do as such.

Looking Forward, denco-ga - Google Answers Researcher

While I agree with denco that restrictive endorsements can, in some
limited cases, create legally binding acceptance, I disagree that one
would be legally binding in this circumstance.
What would prevent someone, knowing that a person never actually
reviews the check, from writing "payment in full" on a $100 check to a
credit card company when the balance owed is $5,000?  Are you saying
that this is enforceable that the customer could then legally stop
making payments?

Yes, I am saying that someone could write "paid in full" and if that
check was cashed with no due diligence, then the creditor could face
litigation with no guaranty of winning said litigation.

Once in court the debtor can make claims of poor service, or defective
merchandise or muddy up the claim in all sorts of ways.  If it was a
$100 check that was "paid in full" for a $200 debt, what is the creditor
going to do if they didn't catch it?

To quote the "Credit-to-Cash" article in more detail.
http://www.credit-to-cash-advisor.com/news_228.html

"Customers will sometimes send checks that contain a 'restrictive
endorsement' on the back or in the memo portion. Restrictive
endorsements include language such as 'in full payment of account',
'full and final settlement', 'final payment', or other language
denoting that depositing the check will operate as a release of all
claims against the customer. The exact wording of the restrictive
language is not significant. However, depositing a check bearing
restrictive language may result in a loss of your right to pursue
the customer for any additional money.
...
By depositing the check, it is likely that you will either have to
write off the remainder of the account or expend additional legal
fees litigating whether this is an 'accord and satisfaction.'"

Granted, there are several things that can happen if the restrictive
endorsement is not done in good faith, as that would probably be a
case of fraud, but that is a different issue.

California Commercial Code 3311 is straight forward.
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=com&group=03001-04000&file=3301-3312

"3311. (a) If a person against whom a claim is asserted proves that
(1) that person in good faith tendered an instrument to the claimant
as full satisfaction of the claim, (2) the amount of the claim was
unliquidated or subject to a bona fide dispute, and (3) the claimant
obtained payment of the instrument, the following subdivisions apply.

(b) Unless subdivision (c) applies, the claim is discharged if the
person against whom the claim is asserted proves that the instrument
or an accompanying written communication contained a conspicuous
statement to the effect that the instrument was tendered as full
satisfaction of the claim."

Yes, there are details that must be followed, and yes, it must in good
faith, but this is only California.  Other states might not have, and
appear not to have restrictions such as written notice.  Yes, language
can be inserted to not allow restrictive endorsements, but some states
disallow such disallowments.

If you don't read a contract before you sign it, are you still bound
by the contract?  Almost all of time, the answer is affirmative and
the contract enforcable.

Checks might be in an "oddball" area being as they are a negotiable
instruments in themselves, and hence contractual agreements of a
sort.  And as such, it strongly appears that these can be modified by
restrictive endorsements, either in the memo or endorsement fields.

The reality is that if someone tried to do such a thing outside of a
good faith situation, then it was going to be litigious anyway.  By
adding a potential fraud charge to it all is not a smart move.

With the question, however, the questioner has stated that a verbal
contract has been offered, and confirmation of the contract is being
sought through a restrictive endorsement on the first check written
after that verbal contract has been offered, in hopes that this will
act as some sort of proof of acceptance of the verbal contract.

This might actually be enforcable, but again, there are too many
"loopholes" by which this scheme can be negated, such as absolute
denial that the verbal contract was offered.  Not good.

People don't realize how many contracts they agree to by virtue of
buying a ticket to a baseball game, using a commercial parking lot,
etc.  No signature, no "real" notification, but still enforcable.

In the case of restrictive endorsements there is notification, and
a "signature" with an offer and provable acceptance of the offer in
the form of a cashed check.  If it sounds like a duck and looks like
a duck ...

Looking Forward, denco-ga - Google Answers Researcher