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Tuesday, October 30, 2007

ACCEPTING A PARTIAL PAYMENT CAN BE DANGEROUS

After entering into a settlement agreement that provided for receipt of monthly payments for a substantial period of time, the opposing party paid only a portion of one monthly payment and refused to cure the balance. Gross & Romanick, P.C. was retained to file suit for breach of contract. The defendant now claims that the terms of the settlement agreement were orally modified by the parties, and that the acceptance of a partial payment represented consent to a “modified” agreement. Although the client should still prevail at trial, the situation illustrates the danger of accepting a partial payment. In this instance a factual dispute as to whether or not the agreement was orally modified is forcing the matter to proceed to a trial.

Consider this a warning!!! If you accept a partial payment under a contract that does not explicitly address partial payments, you may be compromising your ability to collect pursuant to the original terms of the contract. Therefore, do not accept partial payments unless the paying party acknowledges in writing that the payment is intended as a partial payment of an amount due. Failure to obtain an acknowledgment in writing can complicate any ensuing action in Court. Further, when entering into a contract, always include a provision requiring that any modification to the contract to be in writing. It is the best way to prevent the opposing party from asserting an “oral modification” defense.

Since 1980 Edward Gross of Gross & Romanick, P.C. has been drafting, reviewing, and litigating business and other related contracts. The experienced contract attorneys at Gross & Romanick, P.C. are more than willing to assist you and your business with most any contract-related matter. Contact them at 703-273-1400 or visit online at www.gross.com