Does a Check Marked “Payment in Full” Actually Constitute Full Payment?

I was recently asked about the ramifications of cashing a check marked “payment in full” when the amount of the check wasn’t for the full amount owed.  I get this question every once and a while, especially for clients involved in construction.  The question caused me to update myself on the current state of the law in Oregon regarding checks marked as “payment in full” or with similar language.

In the situation posed to me, the company who owed the money wrote “payment in full” in the memo line of their check.  In addition, the check was accompanied by a note which stated that the enclosed payment represented full payment of a final invoice.  However, the check was less than the amount of the final invoice and the company that issued the final invoice was adamant that they were entitled to the full amount of their final invoice.  To complicate matters, they were having some cash flow issues at the time they received the check because of a delay in payment from someone else.  While they desperately needed the money, they didn’t want to give up the remaining balance of their final invoice by cashing a check marked “payment in full.”

From a legal perspective, this dilemma raises the doctrine of accord and satisfaction.  The idea being that the payor’s offer of something less than what is actually owed would be in  satisfaction of the entire debt when the payee cashes a check marked “payment in full.”  In this situation, accord generally means to agree or concur.  From a practical perspective, especially for a creditor who badly needs the money, this potentially puts the creditor in a tough spot.

Cashing a check which includes various written designations by the issuer of the check such as “payment in full,” “paid in full,” “final payment,” and “full settlement” is interpreted by some states and courts as a complete satisfaction or discharge of the underlying debt even if the amount of the check didn’t actually constitute payment in full.  That used to be the case in Oregon a number years ago.  Fortunately, that isn’t the case anymore.

In 1997, Oregon amended the statute (i.e., ORS 73.0311) regarding accord and satisfaction.  The statute is fairly short and concise, so I’ve quoted it below:

“The negotiation of an instrument marked “paid in full,” “payment in full,” “full payment of a claim,” or words of similar meaning, or the negotiation of an instrument accompanied by a statement containing such words or words of a similar meaning, does not establish an accord and satisfaction that binds the payee or prevents the collection of any remaining amount owed upon the underlying obligation unless the payee personally, or by an officer or employee with actual authority to settle claims, agrees in writing to accept the amounts stated in the instrument as full payment of the obligation.” (emphasis added).

In the situation posed to me, the recipient of the check (i.e., the payee) didn’t (nor did anyone else with authority at the payee company), agree in any form of writing to accept the amount stated in the check as payment in full.  In addition, they had sent a few e-mails to the company that wrote the check (i.e., the payor) which stated they disputed the payor’s position that the payor didn’t owe the full amount of the final invoice from the payee.

After becoming aware of ORS 73.0311 and the current state of the law in Oregon with regard to checks marked “paid in full” and the like, the payee proceeded to notify the payor that: (1) the check did not constitute payment in full; (2) they were going to cash the check; and (3)  they would continue to seek payment of the remaining balance.  Fortunately, the check cleared the bank.  I haven’t heard if they collected the remaining balance owed on their final invoice.

Despite the language of ORS 73.0311, be careful when dealing with checks marked “paid in full” or with similar language.  I say this, in part, because of the “agreeing in writing” language in ORS 73.0311.  In my experience, I have seen some crafty (to be kind) payors send cover letters with their checks which state that that the payee’s right to endorse the check is conditioned on acceptance of the reduced amount as full payment.  In addition, crafty payors sometimes add endorsement language to the back of the check which states that endorsement of the check is an acknowledgement of payment in full.

Every fact situation is different.  As such, it is important to be cautious if faced with a situation where a party who owes money to you tries to force you to accept less than what is owed by adding restrictive “paid in full” type language to the check.  However, per Oregon law, if a payee receives a check that is marked “paid in full” or with similar language but said check does not actually constitute payment in full, the payee can confidently cash it and still seek the remaining balance as long as the payee personally, or an officer or authorized employee of the payee, does not agree in writing to accept the amounts stated in the check as payment in full of the obligation.

Should you have any questions about this issue or need any assistance collecting past due amounts, feel free to contact to me at or (503) 226-2966.