Cheque-mate: cashing of a cheque received accompanied by a letter is strong evidence of acceptance of the offer contained in that letter

28/05/2008

The High Court recently decided that where a cheque is received under the cover of a letter and then presented to the recipient's bank, the offer and terms stated in that letter will be deemed to have been accepted.

In [i]Cantor Index Ltd v Thomson Mr Justice Tugendhat held that the presentation of a cheque, regardless of whether the funds are successfully remitted to the payee's bank account, is strong evidence that the payee wishes to accept the terms under which the cheque was received.

In this instance the defendant held an account with Cantor Index Limited for the trading of contracts for difference. Cantor made a margin call on the contracts for difference in July 2006, which led to Mr Thomson owing a debt of over £55,000. Mr Thomson wrote to Cantor on 22 February 2007 suggesting that the debt should be settled by payment of three instalments. This offer was not accepted: Cantor wrote to Mr Thomson on 23 February, with a counter-offer stipulating that any settlement had to include the three payments and three further conditions. Mr Thomson responded to Cantor on 1 March and referred to the terms stated in his first letter of 22 February. The Judge described this restatement of the original terms as a counter counter-offer.

Mr Thomson's letter of 1 March 2007 included a cheque for £15,000, which Cantor immediately paid into its bank account as the first instalment of the settlement agreement. Cantor confirmed to Mr Thomson that it had paid his cheque into its bank account on 8 March, only to receive notification from the bank that the payment had been unsuccessful and a similar communication from Mr Thomson to say that the payment had been cancelled and a replacement cheque would be sent. The following day, 9 March, Cantor wrote again to Mr Thomson, reserving its rights as stated in the counter-offer of 23 February.

Mr Justice Tugendhat found that the settlement agreement had been completed by Cantor's conduct, in accepting the £15,000 cheque (sent on 1 March and paid in immediately thereafter) as payment of the first instalment. For the purposes of this agreement, the offer was made on 1 March by Mr Thomson's letter, and acceptance was made by conduct through acceptance of the cheque. It did not matter that the payment was stopped or that a potential counter-offer was made on 9 March. Payment of a cheque into a recipient's bank account is therefore to be construed, objectively, as strong evidence of the acceptance by conduct of the offer that is contained in the letter or other form of covering correspondence.

(Cantor Index Ltd v Thomson [2008] All ER (D) 271 (May))

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