What are the consequences of cashing cheques in full and final settlement?

What are the consequences of cashing cheques in full and final settlement?


Author: RIchard Gwynne

When dealing with the recovery of money, this is a question that many try to avoid but have had to deal with inevitably end up negotiating.

It is advised that when a claimant is offered a cheque in full and final settlement (F&F) and is less than the amount outstanding on their account but still cashed, they could be stuck with the payment without being able to go back to the debtor for the balance.

Writing back to the debtor stating '... your cheque is accepted as part settlement only and will be cashed on that basis seven days from the date of this letter...'. gives the debtor the opportunity to either object or stop the cheque. If he does neither then the claimant is able to present the cheque in part settlement.

Recent case law shows there is a small window of opportunity if a claimant has cashed a cheque that was presented in F&F and failed to deal with the notice to the debtor. The problem of being stuck with the settlement can still be avoided.

In a recent piece of research, a client had been sent a letter and a cheque together. In the client's post room, the two had become separated and the cheque cashed by the client before the they realised it had been issued in F&F. The client did not contact the debtor to discuss this for four weeks and it was deemed that this period of no contact was too long and therefore too late to argue that it has been cashed not realising this.

The case history below suggests that had the client dealt with the letter dealing with part settlement within a reasonable period, say up to seven days, he would have been able to recover the situation.

There are subjective issues to consider too in these cases and whether the action of the client would give the debtor cause to think it was accepted in full and final settlement. What could those subjective situations be? Perhaps a receipt or the release of a previously withheld order?

Case Law

The key case dealing with a situation where a cheque is sent in full and final settlement of a larger sum which is then cashed by a creditor is Stour Valley Builders v Stuart [2003] T.C.L.R. 8.

In this case, following the previous authority of Day v McLean, it was held that keeping a cheque offered in full and final settlement of a larger amount was not, as a matter of law, conclusive that there was an accord and satisfaction (i.e. acceptance) of the claim. Rather, it was a question of fact on what terms the cheque was kept.

Therefore, the act of cashing the cheque does not, of itself, mean that you would be treated as having accepted the amount as full and final settlement.

The key area is in relation to the delay between receipt (and cashing) the cheque and communicating the fact that it was not accepted as full and final settlement. The cheque was received on 7 February 2012 but no communication was sent rejecting the payment as full and final settlement until 7 March 2012. In Stour Valley Builders v Stuart [2003] T.C.L.R. 8. the delay was less than a week.

In his judgment LJ Lloyd also refers to the decision in Upfield v Marshall where a delay of seven weeks was considered too long.

Further, the judgment in the Stour Valley Builders v Stuart [2003] T.C.L.R. 8. considers whether the claimant's conduct with regard to the delay caused the defendants to think the money was taken in satisfaction of the claim.

In the present situation, the delay between receipt and communication is likely to be a problem as, after a delay of a month, it is arguable the other side would have thought that the money had been accepted in satisfaction of the claim.


It is always best to hold any payments in F&F while you write back to the customer and advise them its only accepted as part settlement and will be cashed on that basis in 7 days. In the absence of any response or objection it would then be appropriate to cash the cheque.

However, if you were to accidentally cash the cheque, all is not lost if you realise in good time.


This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.