Cheques in “full and final” settlement – take the money?

An increasing number of cases deal with the attempts of debtors to avoid or decrease debts through use of these types of cheques. There is a dilemma, especially if the dispute has been ongoing for a considerable period of time, to cash the cheque and pursue, anyway, for the remaining amount. But the trouble is by cashing the cheque, are you then binding yourself to the agreement that the cheque provided is for full and final settlement and therefore barring yourself from further claim?

The case law certainly suggests, that like all things in law that: “it depends”. It depends, very much, on the circumstances, background and the intentions of each party. In other words, the courts have been fairly reluctant to put into place any concrete rules.

The major difference in treatment in these cases or at least probably the only one worth mentioning is when a debt is disputed or undisputed.

The debt was undisputed in the case of D and C Builders v Rees, where the plaintiff was entitled to recover the balance of the sum owed as the cheque offered in “settlement” was nothing other than a means by which the claimant sought to avoid the price of the works carried out because they had been carried out with no complaints.

Another factor in determining whether cashing such a cheque can be binding is time. In Bracken and Another v Billinghurst, the time taken for the creditors to indicate their non acceptance of the cheque as full and final settlement proved a deciding factor. The courts felt that too long a period of time had lapsed without having informed the defendants of their intentions and therefore deemed the acceptance of the cheque in full settlement.

In a disputed debt claim, reliance is placed on the case of Day v McLea, whereby an agreement to accept a cheque in full and final settlement will be heavily based upon the conduct of the creditor. So in Inland Revenue Commissioners v Fry, where the creditors had no idea that the cheque they received was in consideration of full and final settlement were entitled to pursue for the remaining balance.

There are two options for the creditor with the main lesson to be learned from case law is clarity. If you are explicitly clear (when banking the cheque) with your intentions of non acceptance, don’t dilly or dally, do nothing that could be construed as acceptance and notify the debtor straight away of your disagreement to the lesser amount - do this and the courts will likely look upon this favourably on the basis that there has been no consensus in idem to constitute a binding agreement. At the very least immediately write to the other party that you are rejecting the cheque as full and final settlement but will be cashing the cheque as part payment. Be sure to keep a copy of this letter and send by reliable source to the correct address. The temptation is, understandably, high to bank the cheque and pursue for the remaining balance but alongside the requirement of clarity; it may be that the best solution would be to reject the cheque altogether and advise the debtor that full payment is to be made within a short period of time, failing which will result in court proceedings. This way, the debtor has no claim against you.

The Land Registration Act 2012

The Land Registration etc Bill introduced by John Swinney MSP on the 1st December 2011 and receiving Royal Assent on the 10 July 2012 has sought to reform and restate the current law on registration of rights to land, therefore full enactment will cause the replacement and repeal of the Land Registration Act 1979. Although asserted by the Scottish Law Commission that the changes to be introduced were evolutionary; conveyancers have regarded it revolutionary with the proposals set to make a big improvement to the ease of land registration. The main objective of this new legislation is namely to make conveyancing transactions a lot simpler.

Modernising Conveyancing

The Act will seek to bring conveyancing in line with the 21st century in two ways.

First of all, with amendments to the Requirements of Writing (Scotland) Act 1995, the position will enable property transactions to be negotiated, signed an registered electronically making it easier, quicker and therefore cheaper to carry out overall.

Secondly, the Act will seek to recognise one Land Register. Presently, only around 60% of property titles are registered in the land register. Recognising one register means the title and a plan of its boundaries will be available to view online making it easier and quicker for purchasers to research prospective properties. This is a huge improvement as large parts of rural Scotland still rely on written descriptions of the property require an extra degree of diligence making the process lengthier and thereby more expensive. This was one of the primary goals of the legislation and its enactment will see to the closure of the Register of Sasines, rendering a recording on or after the prescribed day as ineffective - section 48 of the new act. In addition to this the law will also recognise a single title map of the whole of Scotland namely Cadastral.

Race to the Register

Many will complain of the unfairness, uncertainty and inadequacies attached to this famous "race to the register" concept in Scotland. The Act will revolutionise this area by bringing it in line with England. Presently, in Scotland to register a title, it is to be lodged with the land register therefore it is not an impossibility that a party could lose his or her title if someone else manages to register a competing title first. However, in England, the position is more certain. There, parties have a "priority period" which is a period of time that can be reserved in advance during which no one else may register a competing title. Similarly, Scottish Law Commission's proposed solution to this problem is to introduce "advance notices" which will have a 35 day effective period. Sections 56-64 deal with this area (part 4). This will afford buyers better protection.

Rectifying Inaccuracies

The Scottish Law Commission recognised that the current law placed "obstacles" in the way of rectifying the Register even if the mistake is of a relatively minor value. S.9 of the old Act makes it overly complicated to rectify inaccuracies with rules on the circumstances in which the Keeper is able to rectify (s.9(3)). Section 9(2) implies that the Lands Tribunal is required to make such an order in respect of rectification. Part 8 of the new Act, however, seeks to do away with such complexities and deals with inaccuracies in two ways. First of all, the definition of "inaccuracy" has been tightened in section 65 to mean when something is misstated in law or in fact; omits anything required, by or under an enactment, to be included in it; or includes anything which is not permitted by or under enactment therefore sieving out any minor deficiencies and section 80 makes provision for only "manifest" inaccuracies and the procedure only involves including in the archive record a copy of any document which discloses, or contributes to disclosing, the inaccuracy and give notice to any person that might be materially affected. Inaccuracies in provisional registration are dealt with simply in s.81 where the Keeper may rectify the register if all those affected consent. Again, what can be evidently drawn from this is the Scottish Law Commission's desire to promote efficiency within these types of transactions; a desire undoubtedly shared.