You’ve probably heard a story about a business owner that cashed a “paid-in-full” check and waived the rest of her claim.  But, can this really happen? A recent case out of Mississippi reminds us that it can.

In this case, a contractor was hired to build a municipal water system.  Disputes arose and the contractor threatened to file suit.  The municipality then issued a check to the contractor marked “Paid in Full”.  The contractor sued the municipality seeking unpaid damages arising out of the project.

During litigation, the contractor conceded that it had cashed the check and knew it was marked “Paid-in-Full,” but never agreed to accept that check as final payment. The trial court had little sympathy for the contractor’s argument, finding that the contractor had waived its claim for additional payment.  Technically, the court said that the contractor’s acceptance of payment marked as final was an accord and satisfaction agreement.

If you receive a “Paid-in-Full” check, make sure you know whether your state will enforce it as a final payment under accord and satisfaction.  If you have any questions, I recommend you contact an experienced construction attorney.