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Retention of Check as Acceptance

Retention of a check offered as payment in full sometimes constitute assent to an accord and satisfaction.[i]  Where a creditor receives a check purporting to be in full payment of a debtor’s disputed obligation, the creditor should return it promptly in order to avoid an accord and satisfaction.[ii]

An unexplained retention of a check for an unreasonable period of time may operate as an accord and satisfaction where the creditor does not cash or otherwise use the check and does not indicate a refusal to accept the check as an accord and satisfaction.  Where the debtor fails to unambiguously condition the tendered check as payment in full, a creditor’s retention of a check may not support an accord and satisfaction.  Moreover, there is no accord and satisfaction where acceptance is explicitly conditioned on the creditor’s endorsement or negotiation of the check.  An accord and satisfaction may be precluded where the creditor notifies the debtor that the check is not accepted as payment in full.

A significant factor in determining whether the creditor’s retention constitutes an accord and satisfaction is whether the debtor has requested that the creditor return the check, if s/he does not elect to accept it as payment in full.[iii]  However, when a check is retained merely for the purpose of collecting evidence, it may or may not effect a settlement of the underlying obligation by means of an accord and satisfaction.[iv]

[i] Valley Asphalt, Inc. v. Stimpel Wiebelhaus Associates, 3 Fed. Appx. 838 (10th Cir. 2001)

[ii] Fidelity & Cas. Co. of New York v. C. E. B. M., Limited, 116 Ga. App. 92, 156 S.E.2d 467 (1967)

[iii] Kelly v. Kowalsky, 186 Conn. 618, 442 A.2d 1355, 33 U.C.C. Rep. Serv. 801, 42 A.L.R.4th 111 (1982)

[iv] Fidelity & Cas. Co. of New York v. C. E. B. M., Limited, 116 Ga. App. 92, 156 S.E.2d 467 (1967)


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