As a general rule, acceptance of a check in full settlement of a disputed unliquidated claim operates as an accord and satisfaction discharging the claim. We do not see this fact pattern arise very often but you may come across this in your business dealings so take note. Checks drawn for deposit can be used as a legal instrument to cut-off or otherwise settle disputed claims between parties. If you are issued a check that contains anywhere on it words such as: “This check is accepted in full payment, settlement, satisfaction, release and discharge of any and all claims and/or demands of whatsoever kind and nature;” “Full Payment;” “In Full Satisfaction;” “Settlement of Contract Dispute;” or any other similar language, be aware that if you sign the check and deposit the check, that you may have just settled the disputed claim for the face value of the check. The legal doctrine of accord and satisfaction is alive and well in New York State.
If you are tendered such a check don’t send it back. After all, this is money going into your pocket that you are likely owed. Simply, write on the back of the check (and on the front for safe measure) the following phrases: “under protest and without prejudice and with reservation of all rights.” Doing so will preserve your legal rights and you will benefit from the money received.