Questions sometimes arise from creditors regarding the effect of a debtor sending to a bank or other creditor a check for less than the creditor’s claim that purports to be in “full satisfaction” of the creditor’s claim against the debtor. This potentially dangerous issue is governed by § 673.3111, Florida Statues, in Florida’s version of Article III of the Uniform Commercial Code.

Under § 673.3111, several requirements must be met before such a payment may satisfy a creditor’s claim. Specifically, a debtor tendering less than full payment in “full satisfaction” will have the burden to show:

  • The check/instrument was tendered in “good faith”;
  • The check/instrument was tendered “as full satisfaction of the claim”;
  • The amount of the claim was liquidated or subject to bona fide dispute;
  • The creditor obtained payment on the instrument (e.g., the check was cashed); and
  • Either the check/instrument or an accompanying written communication contained a “conspicuous statement” to the effect that the instrument is tendered in “full satisfaction” of the claim.

§ 673.3111(1)–(2), Fla. Stat. Simply stated, under § 673.3111, a debtor cannot “trick” a creditor who has a claim for a certain amount into accepting less than the creditor’s full claim. However, if the debtor can meet all five requirements—including the debtor’s own good faith—the creditor’s claim is “discharged” or satisfied.

To protect creditors from mistaken satisfactions, § 673.3111(3) provides certain safe harbors.  If the creditor is an organization, it can protect itself by sending to the debtor a “conspicuous statement” that “communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place.”  If a creditor sends such a notice, any attempted “satisfaction” by check or instrument must be sent to that person. Alternatively, whether or not the creditor is an organization, if the creditor returns the funds within ninety days, it can avoid the consequences of § 673.3111(2).

Finally, even if a creditor meets the “safe harbors” of § 673.3111(3), subsection (4) provides the debtor another opportunity to obtain satisfaction.  To do so, the debtor must prove 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.” Accordingly, a creditor’s actual knowledge that the check/instrument was tendered in “satisfaction” of the debt prevents the creditor from arguing otherwise.

Based on the nuances involved in satisfaction through use of a check/instrument, creditors must be keenly aware of both what to do when they receive a check marked “in full satisfaction” as well as what to do when they have mistakenly deposited such instrument.