Full & Final Settlement Offers - Advice please

[Bill Shidding]

Hi Fred, hope you find the following useful;

 

4. Legal issues regarding making full & final offers - being accepted/agreed and how to make sure they dont/cant come back because of a technicality or some minor legal angle which you didnt cover.

 

Amount disputed:

When a cheque is sent in 'full and final settlement' in a situation where the actual amount claimed is in dispute, it is in the interests of both sides to compromise their respective positions or, in legal parlance, achieve accord and satisfaction.

An example is Stour Valley Builders v Stuart (1992). Stour Valley Builders carried out work for Mr & Mrs Stuart. The builders sent a revised account of £10,163 after the Stuarts had disputed some of the items. Eventually the Stuarts sent a cheque for £8,471 in 'full and final settlement'. Two days after the cheque had been cleared the builders informed the Stuarts that the cheque was not accepted in full and final settlement. The builders sued to recover the outstanding balance.

It was argued in the Court of Appeal that the court should adopt the American rule that the banking of a cheque in these circumstances amounted to an acceptance that it was tendered in 'full and final settlement'. The Court refused to go along with this. Instead, it relied upon the Victorian case of Day v McLea: whether there is an agreement to accept a cheque in full and final settlement is dependent upon the creditor's conduct.

Did the creditor cause the debtor to believe that the money was taken in full satisfaction? In this case the builders had made clear, shortly after the cheque had been cleared, that it was not accepted in 'full and final settlement'. The outcome would have been different if there had been significant delay in informing the debtor. Therefore A must inform B, either at the time the cheque is presented (or shortly thereafter) that he does not accept it in 'full and final settlement'. If he fails to do this he will be regarded as having accepted the amount stated on the cheque.

Summary:

The circumstances in which you will be bound by a cheque made out in 'full and final settlement' are as follows:

• The cheque is offered in circumstances where there is a dispute about the amount owed.
  
• The offer in 'full and final settlement' of the dispute is made at the time the cheque is presented.
  
• You present the cheque in payment and it is duly honoured.
  
• At the time of presenting the cheque or within a short time thereafter you fail to inform the payer that the cheque is not accepted in 'full and final settlement'
  
• Number 4 in the above list is critical.
  

Otherwise, as the Court of Appeal explained in another case, Ferguson v Davis; '...paying in and clearance of the cheque [is] a clear and unequivocal acceptance...'

Furthermore, if you bank a cheque from a third party (as in the Bracken case) in "full and final settlement' of a sum (whether or not disputed) owed by your debtor you will have signified acceptance of it as discharge of the debt.

 

5. Tidying up your credit file afterwards - wording etc.. to ensure this is done as part of the full & final offer. ie. correctly worded letter templates or links to where they can be found.

 

The entry on the credit file should be made in compliance with points 49, 50 and 51 of the ICO Data Protection Technical Guidance 02/08/2007, Version 3. I don't think there is a template letter as the f & f offer would include a clause stating that "the creditor agrees to mark the borrowers credit file as settled or satisfied in compliance with (insert appropriate section from the guidance)"

Here is a direct link-

http://www.ico.gov.uk/upload/documents/library/data_protection/detailed_specialist_guides/default_tgn_version_v3%20%20doc.pdf

 

Hope this helps you out.

 

Bill

[Bill Shidding]

Hi Bob,

 

please clarify the position of where a cheque is sent from a third party to a creditor stating clearly that it is in full & final settlement of a debtors account?

 

As I understand it, if a third party offers a payment in F&F and the creditor accepts the payment (by cashing it etc). Then the creditor has accepted that F&F offer.

The creditor has the option to return the cheque if it is not in agreement with the F&F offer.

Disputed amounts/accounts are easier to settle by F&F, because by definition, there is a continuing disagreement in the amount owing. The creditor may therefore be unwilling to prove the balance before a court.

The case you mention may be a non-disputed case.

 

A certain bank has stated tat the law does not support attempts to impose a unilateral agreement by either party outside of those stated in a legally binding credit agreement.

]

 

Amount disputed:

When a cheque is sent in 'full and final settlement' in a situation where the actual amount claimed is in dispute, it is in the interests of both sides to compromise their respective positions or, in legal parlance, achieve accord and satisfaction.

 

An F&F offer is not an imposition. It is the opening offer in a round of negotiation, with an ultimate goal of setting a mutually agreed settlement. Only upon reaching an agreed written settlement, should any payment be sent.

 

 

I recently had reason to consult counsel about an unrelated issue, and had a spare moment to ask whether a payment clearly made in F&F and banked by the creditor, may be refused as F&F and merely be considered a "part payment". He said that if a payment is clearly made to a creditor in F&F, but the creditor considers it to be a part-payment, then the debtor should demand the return of the payment.

Your guess is as good as mine whether a cash-strapped bank would return a rescinded F&F payment, without court action:).

 

 

Bill

Edited December 24, 2009 by Bill Shidding

[Bill Shidding]

Hi Bob,

 

what do you mean may be a non-disputed case? How would that affect things?

 

If there is no dispute about the sum owed, why would a creditor (on firm legal grounds) accept a lower payment?

 

The letter accompanying the offer was from my mother and clearly stated (both in th eletter and on the cheque) that it was in F&F else the cheque should be returned.

 

Hirachand Punanchand and others v. Temple (1911).

 

Fletcher Moulton LJ at page 340 said:

 

"In the present case you are dealing with the question in respect of money paid by a third person. In such a case there is no difference between payment of the total amount and payment of a proportion of it only, so long as it is paid in settlement of the debt. If a third person steps in and gives consideration for the discharge of the debtor, it does not matter whether he does it in meal or in malt, or what proportion the amount given bears to the amount of the debt. Here the money was paid by a third person, and I have no doubt that, upon acceptance of that money by the claimants the full knowledge of the terms on which it was offered, the debt was absolutely extinguished"

 

(merry xmas!)

Bill

[Bill Shidding]

Hi sgx.saint, please see my post #37 in this thread for the case law quotation on 3rd party payments. As to the query on the source of the funds for the settlement - as I see it, it makes no difference whatsoever as to the original source. The fact that payment is facilitated through a third party should be enough for the creditor to realise its meaning (in law).

 

I would recommend that you satisfy yourself that any advice given is true and enforceable in court.

 

All the best,

 

Bill

[Bill Shidding]

Hi Hugh,

 

If I dont pay them tommorrow I will be defaulted tommorrow

 

I agree with MandM and Dotty. Never be rushed.

 

I have been offered a partial settlement with a well known M type bank of 37%!

 

 

A "partial" settlement leaves you wide open to court action for the balance. Unless the settlement document contains the phrase "this sum is accepted in full consideration of the disputed remaining balance". In which case the partial settlement is known to be F&F, in any event.

 

 

Hi Sgx.saint, no problem.

 

You are welcome to post your F&F doc, I think there may be a template somewhere:confused:

 

Hi Bobdauilda,

 

the case law in post 37 is a little old isn't it-1911?

 

It certainly is, (to the best of my knowledge) it is still relevant case law though.

 

Bill (HNY!)