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If an owner disputes a contractor’s final billing, the owner
may attempt to resolve the payment dispute by tendering a
check in an amount less than that claimed by the contractor,
and indicating on the check itself that the account is being
“paid in full.” But what effect, if any, would this language
have on the contractor’s ability to collect the remainder of
the amount due? In Helton v. Phillip A. Glick Plumbing,
Inc., ___ Va. ___ (February 27, 2009), the Virginia Supreme
Court addressed this issue, holding that such conspicuous
language on the check amounts to an “accord and satisfaction”
of the contractor’s claim and, therefore, by accepting
the check, the contractor waives his right to collect the remainder
of the amount invoiced.
In Helton, Phillip A. Glick Plumbing, Inc. (“contractor”)
contracted with Michael Helton (“owner”) to perform certain
plumbing services and to install a hot water heater in
the owner’s home. Due to his observation that the contractor’s
workers “were taking extended breaks and generally
working slowly,” the owner kept close tabs on the time
spent by the contractor installing the water heater. Upon
receiving the contractor’s invoice, the owner objected to the
amount billed, stating that the invoice was “considerably
high based on the hours worked, multiplied by the rate per
hour.” Accordingly, the owner “paid for the hot water heater
installation but did not pay for all of the hours billed for the
work.”
Subsequently, the owner sent two letters to the contractor
regarding the owner’s complaints of overbilling and
“allegations of ‘goofing off’ and wasted materials.” Finally,
the owner mailed a cashier’s check to the contractor “in the
amount of $1,300.00, which was $1,686.51 less than the
amount billed” in the contractor’s final invoice with the
words “Paid in Full” on the memo line of the check. Further,
the owner transmitted the check with a letter stating that no
more payments would be made due to concerns of overbilling
and lack of efficiency in the installation of the hot water
heater. Upon receipt of the check, the contractor crossed out
the words “Paid in Full” and added “No” and “Balance Due
$1,686.51” on the check before depositing it.
The contractor sued the owner for $1,686.51. The owner
defended on the basis that the contractor’s acceptance of the
owner’s check constituted an accord and satisfaction by use of an instrument. “In order to prove an accord and satisfaction
by use of an instrument,” the
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Virginia Supreme Court
explained, “the person against whom the claim is asserted,
the debtor, must prove that: (1) he in good faith tendered an
instrument to the claimant as full satisfaction of the claim, (2)
the amount of the claim was unliquidated or subject to a bona
fide dispute and (3) the claimant obtained payment of the
instrument.” Va. Code § 8.3A-311(a). The Circuit Court rejected
this defense, finding that the owner had not acted “in
good faith with an honest belief that a bona fide dispute existed.”
The owner appealed to the Virginia Supreme Court.
The court overturned the circuit court’s decision, finding that,
by virtue of the owner’s two letters concerning overbilling
and goofing off, a bona fide dispute existed. Further, the
court observed that, on the face of the check and in the letter
transmitting the check, the owner conspicuously explained
that the check was being tendered in full satisfaction of the
claim. Accordingly, the court concluded that there had been
an accord and satisfaction.
The only issue remaining, therefore, was whether the contractor’s
alteration of the owner’s check justified the contractor’s
argument that “acceptance of the check was for a partial
continued on page 2
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