Contractors Beware: Depositing a Check Titled “Final Payment” May Be an “Accord and Satisfaction” or “Final Release” That Prevents You From Recovering Further Payment

As a general contractor, subcontractor, or supplier, you have likely experienced problems collecting final payment from your customer.  You get to the end of the project, and your customer does not want to pay you the full amount you are owed.  Then you get a check in the mail from your customer, for an amount less than what you are owed.  Should you deposit that check?  Maybe not.  If certain language is written on the check, or is contained in any documents that were sent with the check, you may be better off to NOT deposit the check, and return it to your customer, because if you deposit the check, you will no longer be entitled to the balance of what you are owed.  You will have released all of your claims.  

This scenario was recently the subject of a lawsuit, and it resulted in the contractor getting stiffed on the balance owed.  Constr. Consulting, Inc. v. Dist. Bd. of Trustees of Broward Coll., 347 So. 3d 14, 17 (Fla. 4th DCA 2022).  There, the court applied the doctrine of “accord and satisfaction” to find that the contractor was not entitled to any further payment after depositing a partial payment check it received from the owner, where the check was accompanied by a payment reconciliation report that used the words “Final Payment” multiple times and indicated that it was intended to be a “Final Resolution for payments to Contractor” and a “final agreement” between Contractor and the Owner “to reconcile final payment due to Contractor for outstanding invoices.”  The check was for less than the contractor was owed, and the contractor later declared to the owner that it accepted the check only as a partial payment of the debt.  Nevertheless, the court still determined that the contractor was owed $0.  

This case is a good example of why contractors, subcontractors, and suppliers need to be aware of the doctrine of accord and satisfaction.  Accord and satisfaction is a legal doctrine that has long been a part of Florida contract law.  The Florida Supreme Court has explained the doctrine as follows: “when a claim in controversy is open and unliquidated and the party to whom it is due accepts payment in full it will operate as an accord and satisfaction even though the party to whom paid declares that he takes it only in part satisfaction.”  Id.  By contrast, where the facts do not demonstrate that the parties agreed to resolve a dispute by payment of a set amount, “a partial payment of a legal obligation does not act to satisfy and discharge that obligation.”  Id.

The language used by the parties in a transaction is crucial to the creation of an accord and satisfaction. An accord and satisfaction results as a matter of law only when the creditor accepts payment tendered on the expressed condition that its receipt is deemed to be a complete satisfaction of a disputed issue.  Florida courts have thus recognized that a creditor’s acceptance of payment results in an accord and satisfaction where the check itself or an accompanying writing expressly indicates that the check constitutes payment in full of the debtor’s obligations.  When a creditor negotiates the tendered check with knowledge of the debtor’s intent, whether through discussions, correspondence, or unambiguous language on the check, he is then bound to the agreement and cannot later turn around and sue for the remaining balance due under the former dispute.  Therefore, “[i]f a creditor does not assent to the condition, then the proper course of action is to return the check. Simply put, the creditor cannot have his cake and eat it too.” Id.

Cases finding no accord and satisfaction have focused on ambiguities in transmittal letters and a lack of clarity as to the matters that a tender was supposed to cover. For example, one case found that an accord and satisfaction could not be determined as a matter of law due to the ambiguity of a transmittal letter, which generally conveyed the debtor’s position that “no further benefits will be payable” but did not expressly state that the check constituted payment in full for the debtor’s obligations or that acceptance of the check would constitute an agreement with the debtor’s position.  Id.

Like many issues in construction, accord and satisfaction is complicated, and depends largely on the language in your contract and the final payment check.  If you receive a check or any documentation with the check that contains language purporting to be “final payment” or the like, you should consult with an attorney before deciding whether to deposit the check or return it.  You may be able to deposit the check without it being an accord and satisfaction—you might be able to have your cake and eat it too.