A restrictive endorsement on a check can be used to limit the use of the check. For example, the most common form of restrictive endorsement is “For Deposit Only,” which limits the ability to cash a check over the counter or endorse the check over to another party. However, restrictive endorsements may also be used to resolve claims of money owed between creditors and debtors.
If a creditor claims you owe money, but you dispute the debt or dispute the amount owed, a restrictive endorsement can be used to attempt to resolve the dispute. In Washington, a debtor can tender to a creditor a check or accompanying written communication that contains a conspicuous statement to the effect that the check is tendered as full satisfaction of the claim. To be sure the creditor receives notice that the check is offered in full satisfaction of any claims, it is best to (1) write a restrictive endorsement on the back of the check stating the check is offered in full satisfaction of the claim, and (2) include a cover letter along with the check explaining that the check is offered in full satisfaction of the claim.
If the creditor receives a check with a restrictive endorsement that it is offered in full satisfaction of the debt, and the creditor cashes the check and does not refund the money to you, the debt will be deemed to have been discharged. However, the debt will not be discharged if the creditor (a) does not cash the check or (b) returns the money to you with 90 days of cashing the check.
If the creditor sent you a statement notifying you that communications concerning disputed debts, including tender of full satisfaction of a debt, are to be sent to a designated person, office, or place, be sure to send the check and the cover letter to that exact person, office, or place. Otherwise, the check with the restrictive endorsement may not discharge the debt.
These are merely general principles related to restrictive endorsements in Washington. The rules may apply differently depending on the specific circumstances of each particular case. If you are a debtor thinking of using a restrictive endorsement to resolve a disputed debt, or you are a creditor who has received a check that contains a restrictive endorsement and thinking of cashing it, you should consult with competent legal counsel to discuss the application of the law to your specific situation.
Disclaimer: This article and blog are intended to inform the reader of general legal principles applicable to the subject area. They are not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.
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