www.grantgunston.co.za on 2010-08-27"color:#ffffff" href="http://www.grantgunston.co.za" target="_blank"> www.grantgunston.co.za on 2010-08-27" />
Full and final settlement agreements need careful wording - especially on property deals

Grant Gunston, senior director of Grant Gunston Attorneys, has drawn attention to a recent High Court ruling which affects the generally held perception that if a creditor accepts a cheque in “full and final settlement” of a claim, the matter is over and done with and there can be no further claims.

In the case of Hubbard v Mostert, the judge ruled that the making of a compromise offer in full and final settlement did not in fact cover the second of two amounts owing – a slight ambiguity in the wording of the letter accompanying the payment led to the creditor being able to claim that the second portion of the debt was not covered by the payment.

Gunston said that although this was a rare instance, the lesson to be learned is that final debt payment should be worded so unambiguously (preferably with the help of an attorney) that no loophole is left to be used.

Ideally, he said, the attorney should obtain confirmation from the other party that they accept the payment in full and final settlement, and it should be clear of what the payment is in full and final settlement. There should also be an assurance that there will in fact be no further claims.

“A particularly tricky situation does arise when the dispute involves repairs to a recently sold property. Although the buyer has accepted the “full and final settlement” cheque for post sale repairs, he may discover later that the problem has not been completely solved. Homes sold at the Cape in winter have on occasions been plagued by this problem and, with the best will in the world, the seller cannot guarantee that all waterproofing repairs, paid for by himself, will be 100% effective. The bottom line is that no situation is as straightforward as it might at first appear to be, and if in doubt it is worth engaging the services of an attorney to minimise the possibility of problems escalating.”