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California Civil Code 1526a
This essay is published for informational purposes only. It is not legal advice, nor is it intended as a substitute for the advice of your attorney.
When a claim is disputed or unliquidated and a check or draft is tendered by the debtor in settlement in full discharge of the claim, and the words "payment in full" or other words of similar meaning are noted on the check or draft, the acceptance of the check or draft does not constitute an accord and satisfaction if the creditor protests accepting the customer's check tendered in full payment. The seller does so 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." In layman's terms, if a debtor sends a check marked "payment in full", the creditor comapny must line out or black out those words on the check.
The debtor can not view this as acceptance of the full payment, even if your accounts receivable department did not notice the "payment in full" markings and cashed the check as is. Some debtors will attempt to use a check to teminate a personal guarantee. For example, they may write something on the check such as this: "cancel personal guarantee". Generally speaking, this cannot be voided by simply striking out this language. Generally, a personal guarantee will be canceled from the date the seller receives the check unless there is an agreement in effect stating personal guarantee cannot be terminated except by a specific mechanism. For example, a contract may state that a personal guarantee may only be terminated by registered letter and only after 30 days advanced written notice.
Edited by Michael C. Dennis.