Every
day, people draw up dispute
or settlement letters to collectors
and collection agencies and find themselves in a whole lot
of trouble. Before you begin to delve in to "playing
lawyer" you had better understand what your goal is and
what tool to use when approaching the subject of accord and
satisfaction and contract law. It's understandable that consumers
get this information wrong because there is so much of it
out there, and with state
and federal rules, one is never sure -so before you open
a can of worms, understand that you need to consider the outcome
and that it may be a bad one.
Restrictive
Endorsements and Accord and Satisfaction Fact:
It may sound confusing but basically a restrictive endorsement
creates an accord and satisfaction by creating a contract
that is binding between two parties, but... there can be no
accord without satisfaction (meaning the other party needs
to accept, not be forced or deceived).
Accord
& Satisfaction Accord and satisfaction is a contract
law concept about the purchase of the release from a
debt obligation. The payment is typically less than
what is owed and is not paid by the actual performance
of the original obligation. The accord is the agreement
to discharge the obligation and the satisfaction is
the legal "consideration" which binds the
parties to the agreement. If a person is sued over an
alleged debt they bear the burden of proving the affirmative
defense of accord and satisfaction.
The accord
agreement must be transacted on a new agreement. It
must therefore have the essential terms of a contract,
(parties, subject matter, time for performance, and
consideration). If there is a breach of the accord there
will be no "satisfaction" which will give
rise to a breach of accord. In this instance the non-offending
party has the right to sue under either the original
contract or the accord agreement.
Restrictive
Endorsement
An endorsement on a check with restrictions. An endorsement
is a signature on the back of a check stating that the
payee has consented to receive the funds from the payer.
A restrictive endorsement states the circumstances under
which the payee will accept the funds under the signature.
A valid accord does not discharge
the prior contract, it
suspends the right to enforce it in accordance with the terms
of the accord contract, in which satisfaction, or performance
of the contract will discharge both contracts (the
original and the accord). If the creditor breaches the accord,
then the debtor will be able to bring up the existence of
the accord in order to enjoin any action against him. Related
to this would be offer
and acceptances.
Accord is the agreement
and satisfaction is the execution of the contract or agreement.
Both parties MUST be involved otherwise there is no accord
and satisfaction. This is particularly important if you are
trying to negotiate terms with a collection agency or creditor.
Simply sending an A&S will not be binding. What makes
an accord and satisfaction different than a contract? There
must be a prior dispute that both parties could not agree
to and by creating a new accord, you are both agreeing to
a new set of terms. This is why both parties must agree. Lots
of people assume they can send an accord off to a collector
and that binds them. This is not true.
Since an accord
& satisfaction is a contract then contract terms must
be present. Once both parties have agreed to the new contract
then the case is final. For example, say you have an original
credit card debt for 10,00.00 but you dispute a portion of
the bill and are able to prove it to the creditor. If the
creditor agrees, you will enter into the new terms which will
bind you both. Part of your terms may be that you will pay
less and the creditor agrees to accept it as final and full
payment. No future collection efforts from them can be made.
All A&S must be in writing just as any other legal contract.
Remember. An
accord without satisfaction is worthless. If you have
an ongoing dispute with a creditor, collector or even a neighbor,
contractor etc., you can use an A&S to settle your matter.
Restrictive Endorsement
A restrictive endorsement
is usually a matter of purely money. If I create a check with
a restrictive endorsement and you cash it, you have created
an execution of that endorsement which basically means you
agreed to my terms. This is not a sure thing however because
state laws apply. Not every state honors RE's. Be sure to
check state statutes.
Most commonly,
a restrictive endorsement is used to settle a debt and satisfy
not only the other party, but to protect yourself from future
collections. A RE can also mean pretty benign actions like
"for deposit only" meaning the check is to be deposited,
not cashed out. In terms of collectors, many people use a
RE to settle a debt. They may have attached a settlement letter
to the check and sent them both in one envelope to the creditor.
Dont be fooled into thinking that the creditor has to follow
the requirements of the letter in order to cash your check.
If there are no RE terms on the actual check, then there are
ways around the clause by the creditor. He can still cash
your check and trash your letter.
So how do you protect
yourself? Well, outside of state laws that dont honor them,
you have to put the RE on the actual check. This will prove
that the creditor saw the terms and cashed the check. Cashing
of the check would obviously mean they agree. An endorsement
on a check with restrictions has been created. An endorsement
is a signature on the back of a check stating that the payee
has consented to receive the funds from the payer. A restrictive
endorsementstates the circumstances under which the
payee will accept the funds under the signature.
It's a smart idea
to work out the terms of the RE before you send it to ensure
the creditor agrees. Take note of who you are sending it to
and their physical location. You wouldn't want to send a RE
to a lockbox or payment processing center where they dont
read letters. The creditor could use that defense claiming
that technically nobody saw your agreement because they only
process payments at that location. A physical location with
a person's name (manager, supervisor etc.) would be ideal.
It's also a good idea to check the contract
you signed with the creditor. Some of them have it disclosed
in it that they do not honor restrictive endorsements. In
that situation you would need to have their approval of your
settlement/payment in writing before issuing payment. Some
states allow a creditor to cross out the RE and cash it "under
protest" so you need to tread carefully when dealing
with these types of settlements. It's very practical to get
dialogue going with the creditor before hand to ensure success.
