cheques
When attempting to negotiate repayment from a
debtor, it might initially appear attractive to accept and bank a
cheque offered in payment and then pursue the debtor for the
remainder. Take care though: paying in a cheque is strong evidence
of acceptance by conduct of any offer accompanying the cheque, and
you may find yourself unable to pursue the debtor for the balance
of the debt, or be unable to pursue it on your terms.
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The case of Cantor Index Ltd v Thomson is a recent reminder of
this. Thomson, who had an account with Cantor, which had demanded
repayment, made an offer to settle the debt by instalments. Cantor
made a counter-offer which was to accept Thomson’s offer, subject
to three stipulated conditions. Thomson then made a final offer
which repeated the terms of his original offer, and enclosed a
cheque by way of payment of the first instalment, which Cantor
banked. The cheque was not met on presentation and Cantor sought to
enforce the settlement, but on the terms of its counter-offer. A
dispute arose as to whether a settlement had been agreed, and, if
so, upon what terms.
The court dealt with the various offers and counter-offers that
had been made by the parties. It confirmed that rejection of an
offer terminates the offer so that it can no longer be accepted. An
attempt to accept an offer on new terms not contained in the
original offer will lead to a rejection of the original offer
accompanied by a counter-offer. Here, Thomson’s offer had been
rejected by Cantor’s counter-offer, which in turn had been rejected
by Thomson’s final offer.
Had the final offer been accepted? The court held that Cantor’s
conduct, in immediately, and without demur or qualification,
banking the cheque was, objectively, strong evidence of acceptance.
As at the date that the cheque was banked, it was expected by both
parties to be the end of the matter. Thus, a settlement had been
achieved on the terms of Thomson’s final offer.
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By GlobalDataConduct will only amount to acceptance if it is clear that there
is an intention to accept the offer. That intention will be
determined objectively. Cashing a cheque is always strong evidence
of acceptance, especially if it is not accompanied by an immediate
rejection of the offer. Retention of a cheque without rejection is
also strong evidence of acceptance, depending on the length of the
delay in notification of rejection.
However, neither of those two factors alone is conclusive. If a
cheque is offered but the accompanying proposed terms of settlement
are not acceptable, the cheque can still be banked but only after
the offer has been formally and clearly rejected. The key is to
make it clear that the cheque is being accepted as payment of part
of the debt only, not in settlement of it.
The author is a partner in Wragge & Co
LLP’s Finance, Insolvency, Recoveries and Sales
team
