Home improvement projects often end with disputes between the owner and contractor regarding the quality of the work done and the amount due the contractor. Homeowners often attempt to resolve these disputes by sending a check purporting to be “final payment” to the contractor. In a recent decision, the Minnesota Court of Appeals found that a homeowner’s statement that payment was “final” barred a later claim by the contractor for the balance allegedly due.
In Detailed by Design, LLC v. Langer, No. A21-0879, 2022 WL 93371 (Minn. Ct. App. Jan. 10, 2022), an unhappy homeowner claimed numerous defects with their contractor’s work. Unable to resolve the dispute, the homeowner sent a letter to the contractor that detailed a number of deductions and calculated a “final payment.” In addition, the homeowner wrote the words “final payment” on the “memo” line of their check. The contractor cashed the check, but later sued the homeowner to collect the balance it claimed to be due. On these facts, the Minnesota Court of Appeals found an “accord and satisfaction” had been created under Minnesota law, barring the contractor’s claim.
Minnesota’s version of the Uniform Commercial Code provides that negotiation of a check with “a conspicuous statement” that it was tendered in full satisfaction of a disputed claim bars further claims by the recipient of the check (unless the funds are returned within 90 days). The Detailed by Design court found that using the words “final payment” on both the check and the cover letter was sufficiently conspicuous and unambiguous to create an accord and satisfaction. In addition, the court found that an accord and satisfaction is not a modification of the parties’ previous contract, but a new contract that discharges all rights and duties under the previous one.
The decision in Detailed by Design is helpful to homeowners, but its holding extends to other parties who deliver a check marked as “final payment” in hopes of ending a dispute. It should also caution a party receiving such a check to think carefully before cashing it—and likely barring a claim for the balance.