Law Report: Cashing cheque was not conclusive: Stour Valley Builders (a firm) v Stuart and another - Court of Appeal (Lord Justice Lloyd and Mr Justice Connell), 21 December 1992

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The keeping and cashing, by the creditor, of a cheque sent by the debtor in full and final satisfaction of a larger claim, was not conclusive evidence of accord and satisfaction, and the question whether the cheque was accepted in full and final satisfaction remained one of fact for the court.

The Court of Appeal dismissed an appeal by Mr and Mrs T P Stuart from the decision of Assistant Recorder Akast, sitting in Sudbury County Court on 5 May 1992, giving judgment for the plaintiffs, Stour Valley Builders, on a claim for sums unpaid under a building contract.

David Pugh (Bankes Ashton, Bury St Edmunds) for the defendants; John Brooke-Smith (Bates Wells & Braithwaite, Sudbury) for the plaintiff.

LORD JUSTICE LLOYD said that the plaintiffs sent the defendants a revised invoice for pounds 10,163 for building works they had done on the defendants' home. The defendants considered it too high. The amount in dispute was about pounds 3,000. The defendants offered to settle for pounds 8,471, sending a cheque for that amount 'in full and final settlement'. The plaintiffs kept and cashed the cheque. But they told the defendants by telephone that the cheque could not be accepted in full and final settlement.

The assistant recorder found as a fact that there was no agreement between the parties to accept the cheque in full and final satisfaction of the claim. The defendants appealed.

In the United States, the rule appeared to be that 'the use or retention of the cheque by the creditor, with knowledge of the condition (that it was sent in full and final settlement) is regarded as an assent to it': see Williston on Contracts (3rd edn) para 1854.

Mr Pugh urged the court to adopt the American rule. It had its advantages, but there were analytical and conceptual difficulties. Accord and satisfaction depended on the debtor establishing an agreement between the parties whereby the creditor undertook for valuable consideration to accept a sum less than the amount of his claim. As with any other bilateral contract, what mattered was not what the creditor himself intended, but what, by his words and conduct, he had led the other party as a reasonable person, in this case the debtor, to believe.

If the creditor, at the very moment of paying in the cheque, made clear he did not assent to the debtor's condition, how could it be said objectively that he had accepted the debtor's offer?

In his Lordship's judgment, there was binding authority that no such rule applied in England. In Day v McLea (1889) 22 QB 610, the Court of Appeal held in similar circumstances that keeping the cheque was not, as a matter of law, conclusive that there was an accord and satisfaction of the claim, but it was a question of fact on what terms the cheque was kept.

Though the cheque was not cashed in that case, it had been in the earlier case of Miller v Davies (unreported), where the Court of Appeal, in a decision which was followed and approved in Day v McLea, declined to interfere with a jury's decision that, despite the cashing of the cheque, there had been no accord and satisfaction.

It followed that it was for the assistant recorder in this case to decide on the facts whether the plaintiffs accepted the defendants' offer so as to create accord and satisfaction.

Cashing the cheque was strong evidence of acceptance, as was delay before rejection of the offer; but neither factor was conclusive. Here the delay before rejection was brief, and the recorder was entitled to conclude as he did.

Mr Justice Connell agreed.

Paul Magrath, Barrister