Should You Cash That Check?

You receive a check for less than the amount owed from a company. The company has stated that they owe you less than you contend is owed. Should you cash the check?

Virginia Law: In the 2002 case of Gelles & Sons General Contracting, Inc. v. Jeffrey Stack Inc., the Virginia Supreme Court for the first time interpreted Virginia Code �8.3A-311 which is a 1992 statute enacted to address the issue of cashing such checks. According to the Supreme Court opinion, the test is whether "a reasonable person" would consider the check to be a tender in full satisfaction of the claim.

Facts of Case: A general contractor ("general") and its subcontractor ("sub") dispute the amount owed by the general to the sub. The general wrote two letters to the sub setting out its position and included a check with the second letter which stated that it represented "final payment". The sub cashed the check but sued for the balance it claimed was due. The trial court found (and the Virginia Supreme Court agreed) that the letter and check was a "drop-dead letter" offer of final payment. By cashing the check, the sub could not sue for any additional sums.

Advice: If there is a question about whether a check is tendered as final payment, look at the correspondence and notations on the check to determine the intent of the maker. Cashing checks may be risky if there is some evidence for an accord and satisfaction.

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The above is not meant to replace legal counsel. If you'd like to speak to one of Gross & Romanick's lawyers, please contact us by calling 703-273-1400 or by filling out this Information Request form.

Statute Of Frauds

Based on its name you might think that the Statute of Frauds has something to do with criminal or civil fraud, but it doesn't. The name "Statute of Frauds" actually refers to a law passed by the British Parliament in 1677, and the name has been retained through the centuries. It specifies which kinds of contracts must be in writing in order to be enforceable. Its purpose is to prevent the setting up of supposed agreements and then supporting them by perjury.

The most common applications of the Statute of Frauds are as follows:

Holding a person responsible for the promise to pay the debt of another
Contracts for the sale of real estate
Leases for real estate over 1 year
Agreements which cannot be performed within 1 year
Sale of personal property over $5,000
Sale of goods over $500, unless the buyer accepts the goods
Agency agreements

While the Statute requires a written agreement, almost any writing sufficient to indicate some kind of agreement between the parties will suffice. However, the "writing" must be signed by the party who is being charged. Thus, the venerable Statute of Frauds is still an important and influential part of modern law.

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The above is not meant to replace legal counsel. If you'd like to speak to an attorney, please contact us at 703-273-1400 or by filling out our online information request form.

Liquidated Damages

Liquidated Damages is the dollar amount stipulated in a contract which the parties agree is a reasonable estimation of the damages that would be owed to one party in the event of a breach by the other party. Companies often rely on liquidated damages clauses to assure performance of the contract. Since the amount of damages is often difficult to ascertain when there is a breach, a liquidated damages provision attempts to fix the amount. Even if the parties agree to a liquidated damages clause, the Court will only award the actual damages suffered if they can be ascertained. In theory, the clause also saves litigation time and legal fees.

WHEN VALID: The Commonwealth of Virginia recognizes liquidated damages clauses in contracts as valid under the following conditions:

(1) The figure must be a reasonable amount contemplated at the time of contract to be the probable loss to the non-breaching party in the event of a breach;

(2) The amount cannot be punishing or punitive damages, grossly in excess of the actual damages; and

(3) The damages must not be susceptible of a definite measurement. The Court examines the conditions at different times of the contracting parties' relationship. When looking at the first and third conditions, the court examines them from the time of the contract. The second is examined at the time of breach.

ACTION ADVICE: In order to improve the likelihood of enforcement of a liquidated damages provision, a contract clause should state that the opposing party waives their right to contest the enforceability of the liquidated damages clause. In Gordonsville Energy v. PEPCO (1999) the Virginia Supreme Court upheld such a waiver of rights provision.

INTERESTING NOTE: Virginia 6.1-330.63 allows credit card companies to charge any amount of liquidated damages as late fees.

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The above is not meant to replace legal counsel. If you'd like to speak to one of the attorneys at Gross & Romanick, call our offices at 703-273-1400 or fill out our online Information Request form.