The mother of one of my employees works at a hospital. A patient paid his bill and wrote "Paid in Full" on the "for" line. Her mother wants to know if the hospital deposits and processes this check, does that mean that the hospital is legally accepting the amount paid as paying in full the amount owed?

I don't think this is legally binding; if it were then everyone would be doing it. But should she cross out the "Paid in Full" on the check, do nothing, or what if anything?

DB -- it is highly doubtful that the statement on the "For" line of the check would be enforced against the hospital. However, the mother should talk to the hospital's legal counsel to determine the applicability of her state's statutes and/or case law on the subject.

I have heard in the past that if this is caught, it is a good idea to send a letter re-enforcing knowledge of the amount still owed. While the comment on a check is not normally enforceable this avoids any clouding of the issue and you get your funds from the check.

Still, asking counsel is a good idea.

Under the revised UCC, there is a section which deals with "accord and satisfaction". http://www.law.cornell.edu/ucc/3/3-311.html

It probably would not apply in this circumstance because the amount of the claim must be unliquidated -- meaning the exact amount owed is not quantified. The amount tendered must be tendered in good faith, the amount of the claim must be unliquidated, and the person who receives payment must actually cash the check. Even then, they have a period of time to change their mind and tender a refund in order to avoid accord and satisfaction.

This section is intended for situations like where Jane slips and falls at Robert's house and gets injured. Robert (or his insurer) probably owes Jane something, but how much is subject to debate. If Robert makes a proposed settlement by tendering a check to her with the notation full payment -- and it is in an amount that he in good faith believes is sufficient -- and she accepts the payment and doesn't subsequently seek a refund, there is deemed to be an accord and satisfaction.

The UCC does not make any reference to the memo line - it has no legal significance.

If I write you a check and, on the back above where you will sign, write "Accepted As Payment in Full" I may have you. It is a restrictive endorsement and you agree to it when you endorse the item.

I would suggest you look at your state statutes under Artcile 3&4. In Wisconsin (1996), a "full payment" check is valid if:
1. The person sent the "full payment" check in good
faith
2. The amount of the debt was subject to a bona fide
dispute.
3. The creditor obtained payment for the check.

Also, in order for the "full payment" check to work, it must be sent to a designated person, office, or place. Now that the hospital has proper knowledge, I would return the check for proper drafting or accept the check and cut your loss. To simply cross it out and endorse it will not alter the liability on behalf of the creditor.

I would normally agree w/Ken that putting "Full Payment" on the memo line has no legal significance, but Ive seen judges go the other way.

In a small claims court I was in several years ago, the judge was heard to remark something to the effect that non-lawyers dont know what a restrictive endorsement is and so when they place a note on the memo line (full payment, etc.) this is the legal equivalent of a restrictive endorsement.

So, ignorance of the law isnt always the end of the story and you never know what a judge will do when s/he needs to "stretch" the law to achieve a "fair" result.

Subject to what your lawyer says, I would NEVER cash a check that had "Full Paymewnt" written on the check. Its just not worth the potential hassle, IMHO

Agreed, that is what Mary Beth is talking about with "accord and satisfaction." If we have not established an amount due or have a dispute over the amount due, and I tender you a check noted "payment in full" and you negotiate it, then you have accepted it as payment in full. That's from the model version of 3-311.

Either a dispute or the lack of an agreed upon amount is a condition precedent to allowing the "paid in full" language to control the situation. If neither is present, the language does not operate.

Gave all of this info to employee. Hospital has decided to deposit check and send ex-patient a statement showing amount due. After checking their records, the ex-patient is an older guy and they think he is just confused. Hope so!

Thanks for all replies and great info.