CASHING CHECKS --- A CHANGE IN THE
TIMES!
The
definition of accord and satisfaction is “An agreement between two persons, one
of whom has a right of action against the other, that the latter should do or
give, and the former accept, something in satisfaction of the right of action
different from, and usually less than, what might be legally enforced.” Black’s Law Dictionary, 4th
The
legal concept of “accord and satisfaction” is not new, however, and on January 7,
2010, the
Court of Appeals, in a published opinion, gave teeth to the defense of accord
and satisfaction that should give reps pause and concern.
The
facts of the case are as follows:
Plaintiff
was a manufacturer representative, Defendant was a principal.
On
June 21, 2006, defendants sent plaintiff a correspondence informing plaintiff
that they were terminating their contract and stated that plaintiff would
receive her commissions through June 30, 2006. Included with the correspondence
was a check for $ 7364.94, and on the comment line was written, "JUNE 2006
FINAL PMT."
Plaintiff's
attorney responded and explained that plaintiff would be cashing the check for
$ 7364.94 with the understanding that the future commissions were still in
dispute and; therefore, the check would not be considered as a final payment.
The Court of Appeals
applied the statutory claim of accord and satisfaction MCL
440.3311(4), which states:
A claim is discharged if the person
against whom the claim is asserted proves that within a reasonable time before
collection of the instrument was initiated, the claimant, or an agent of the
claimant having direct responsibility with respect to the disputed obligation,
knew that the instrument was tendered in full satisfaction of the claim.
The
Court of appeals dismissed Plaintiff’s claim and ruled that it had no cause of
action because the Defendant issued the check with the notation of final
payment. The Court stated:
Not only did defendants send a check
containing the words "JUNE 2006 FINAL PMT." on the memo line, but it
also was sent with a correspondence containing defendants' intention to
terminate the contract. Upon receiving this check and correspondence,
plaintiff's attorney sent a responding correspondence stating:
My client . . . received a check of $
7364.94, representing a payment for June. The memo on the check also indicated
that it was a final payment. As you know, the issue of future payment is in
dispute in this matter and therefore, the check is being cashed with the
understanding that it is not, in fact, a final payment . . .
Plaintiff fully understood that the
check was tendered for final payment. Not only did plaintiff acknowledge it was
for final payment in this correspondence, she cashed the check knowing that the
check was intended to be for final payment. This was proper accord and
satisfaction according to MCL 440.3311(4), and the trial court did
not err in granting summary judgment on this issue.
This
case is a poor decision by the Court of Appeals. From the Court record, it appears that this
matter has been appealed to the Michigan Supreme Court. If the Michigan Supreme Court does grant
leave to appeal and overturn the decision of the Court of Appeals, this will remain
controlling law and will continue to affect your legal rights.
This
case should make Reps pause when considering the positions a Principal may take
with regard to commissions owed to its Reps. A Rep should immediately seek legal advice if he/she is in a situation where commissions are being withheld or where there has been a change in
commission percentage, as Principal will surely assert the defense of Accord and
Satisfaction, which can potentially affect all future commissions.
Further,
electronic banking will add additional uncertainty since there will not be a
check to negotiate, but the correspondence from the Principal may still have
the same affect on a Rep's rights.
Reps, make
sure rights regarding commissions are not being waived the minute notification is received that there is a change in commissions.