Cheques marked "final payment"By Alexandre Lebeau Lawyer
Creditors should bear in mind that if a debtor writes a cheque to them with the wording "Final payment" or "In final settlement" when the amount of the cheque is less than the balance owing, and if they cash that cheque, they may deprive themselves of the right to pursue a claim for the balance that remains unpaid. A creditor may not simply suppose that the cheque he or she is cashing is merely another payment on account. If he or she cashes the cheque without protesting or expressing disagreement with the release written on the cheque, he or she may create a presumption, in the absence of evidence to the contrary, that he or she has accepted the offer tendered by what the debtor means of the cheque and has agreed to terminate the claim or legal dispute.
To avoid such an outcome or prevent the cashing of a cheque containing a release line from being considered as constituting a final transaction, the creditor should clearly tell the debtor that he or she disagrees with the words written on the cheque and intends to cash it solely as payment in part, while retaining his or her claim against the unpaid balance, unless the debtor contests the claim. The debtor, however, must be allowed a reasonable amount of time to respond or contest the claim, as the case may be.
It is a simple matter of prudence to make sure that no release is written on cheques to you before you go ahead and cash them without hesitation.