Tender in Full Settlement

Payments in full and final settlement

The question to ask is whether the payment is tendered after a dispute has arisen in respect of which there have been negotiations or litigation, or whether it is made in isolation. In summary:

  1. The acceptance by a creditor of a tender made in full and final settlement may, depending on the circumstances, amount to a settlement of the debt. The meaning of the expression ‘in full and final settlement’ depends on the context in which it is used.
  2. As a rule, the sending of money (in the past, a cheque) ‘in full and final settlement’ of a debt amounts to an offer of compromise, especially if the money is accompanied by a denial of liability. The offer carries with it the implied condition that, should the money be accepted, the claim is settled. Be Bop a Lula Manufacturing & Printing CC v Kingtex Marketing (Pty) Ltd [2008] 1 All SA 529 (SCA), 2008 (2) SA 327 (SCA).
  3. A creditor who accepts payment also accepts the offer of compromise. A creditor who does not wish to compromise must return the money tendered and sue for the full amount. ABSA Bank Ltd v Van de Vyver NO [2002] 3 All SA 425 (A), 2002 (4) SA 397 (SCA).
  4. Such settlement presupposes an existing dispute in relation to the indebtedness. Karson v Minister of Public Works 1996 (1) SA 887 (E)

In the Karson case , the court stated that what was required was to examine the facts and see what the context was in which the payment is tendered , i.e. whether payment is tendered after a dispute has arisen in respect of which there have been negotiations or litigation, or whether it is made in isolation.

What is apparent from the cases is that a debtor can tender part payment of a debt with the following two intentions:

  1. To settle only the admitted portion of the debt and leave the disputed portion thereof to be decided by the court, i.e. to make a part payment and thus narrow the extent of the dispute; or
  2. To settle the entire debt, and thereby extinguish any right that the Creditor might have had to recover the balance.

 

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