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JURISDICTION: New Hampshire, United States

If a creditor refuses to accept payment for a debt, is the debt extinguished?

I know this sounds bizarre, but some companies are no longer accepting payment for debts or other obligations unless they meet some criteria.

For example, recently I had a vendor refuse a check to pay for goods because there was a company name on the check and the goods had been purchased under the personal name of the agent who bought the goods, not under the company name. Crazy.

Anyway, from a legal point of view the check was good and was presented to pay for the goods and the vendor's refusal of the check essentially constitutes refusal to accept payment. So, what happens now? Should I consider the debt to be extinguished? Do I need to sue them to extinguish the debt??? What the heck, if they don't accept my check, I don't see how they can keep insisting I owe them money. There was no agreement I ever signed whereby I promised to pay them only out of certain bank accounts or whatever.

What is the law or UCC on this?

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    Without writing a full answer, the legal buzz word here that describes the conduct in the question is "tender of payment".
    – ohwilleke
    Dec 5, 2022 at 22:27
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    @user6726 This is not a question about who owes whom to what. This is question about whether a debt is extinquished if the vendor refuses payment. For example, let's say an Electric Utility company receives a postal money order to pay an electric bill and the invoice number is recorded on the money order. The utility then returns this money order and states that they refuse to accept it. Is the electric bill then deemed satisfied under the law?
    – Cicero
    Dec 6, 2022 at 16:44
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    Cicero, if what you state in the comment is your question then edit it to say that. That is @user6726's point. Rejecting a check from a third party is not the same thing as rejecting a money order from the debtor. Dec 6, 2022 at 19:09
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    The vendor absolutely has a way to know who owns a particular bank account, because as you state in the question, your company name is on the check! And a money order is not a check, it is a money order. Dec 6, 2022 at 20:28

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it depends on the contract.

Let's say Alice has a contract with Bob, formulated as follows: Alice lends Bob 20 dollars and in return, Bob repays Alice 2 dollars a week for 11 weeks.

The contract does not have room for an early payment of any outstanding amount. It also has no room for Charly to pay for Bob's fees. So Alice does not have to accept Bob trying to pay off all the remaining amount at once, or Charly to pay for Bob's loan. She may, but nothing forces her to accept those alterations to the contract. She can insist on the term: Bob repays Alice 2 dollars a week for 11 weeks.

Now, Bob presents a check for 2 dollars that is signed by Charly. Does Alice have to accept it? No. Alice is entitled to a payment from Bob. The Check is a payment that goes from Charly to whoever cashes the check. Alice is not entitled to any payment from Charly. In fact, she might not even be allowed to cash the check legally.

Since Alice is entitled to the payment from Bob, Bob could cash the check from Charly and then write a check to Alice. Or Bob could do a money transfer to Alice. Or he could take the cash to Alice. But she does not need to accept a check that is not a payment by Bob. Though, nothing forces her to accept checks to begin with, if her terms of service exclude payment by check.

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  • But what if there’s no written contract that goes into such detail? The question seems to be a basic “product X at price Y” transaction, with just a minor wrinkle… Dec 6, 2022 at 15:33
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A contract may restrict the manner of payment

All contracts implicitly limit payment to the currency in which they are denominated. So, for a contract denominated in USD, payment in EUR or CAD or Bitcoin or poppy seeds may be refused.

A contract may restrict payment by excluding some forms (e.g. no checks or no cash) or by specifically nominating a form (e.g. payment will be by electronic funds transfer). Such terms are binding and other types of payment may be refused.

If the contract is silent then the recipient may reasonably limit the types of payment they will accept. In countries where there is a legal tender law (e.g. the USA), legal tender must be accepted unless the contract excludes it. Note that not all jurisdictions have legal tenet laws; Scotland for example and, in England and Wales, it is limited to banknotes issued by the Bank of England - notes from Scottish banks are not legal tender even though they are in GBP.

Offering payment of a debt in legal tender discharges it whether or not it is accepted - again, unless the contract excludes that method of payment.

TL;DR

The creditor is not obliged to accept that (or any other) check. You still owe the money.

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ohwilleke was nice enough to answer this question in the comments, so I will just expand on what he wrote. Presenting a negotiable instrument does extinguish the debt if the creditor refuses it. Here is the quote from the UCC:

2016 New Hampshire Revised Statutes
Title XXXIV-A - UNIFORM COMMERCIAL CODE
Chapter 382-A - UNIFORM COMMERCIAL CODE
Section 382-A:3-603 - Tender of Payment.
Universal Citation: NH Rev Stat § 382-A:3-603 (2016)

382-A:3-603 Tender of Payment.
(b) If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.

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  • I don't think your summary is accurate. "Instrument" here refers to something like a promissory note that is being "enforced" (i.e. collected on). To discharge that obligation, you have to make "tender of payment", which is defined in ohwilleke's link as needing to be made in "any means or in any manner current in the ordinary course of business". Dec 7, 2022 at 16:29
  • Allowing the debt to be discharged by presenting any negotiable instrument would be absurd (and btw the word "negotiable" is nowhere in the quote). "Negotiable instrument" includes not only checks but also promissory notes, such as an IOU from your deadbeat Uncle Harry. It's "negotiable" in the sense that you can sign it over to someone else, and now they are the one who can (try to) collect from Uncle Harry, but that doesn't mean it's actually worth anything like its face value. Dec 7, 2022 at 16:32
  • @NateEldredge Well, by "negotiable instrument" I am meaning "tender of payment" such as a company check or bank check or money order or US Treasury note.
    – Cicero
    Dec 7, 2022 at 18:24
  • Okay, but what I'm saying is that "negotiable instrument" and "tender of payment" mean very different things and should not be conflated. It's confusing to use a technical term that has an established technical meaning, and then say that by it you mean something else entirely. Dec 7, 2022 at 19:53
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Yes, their refusal to accept your check frees you from any obligation to pay for this debt. You don’t owe them any money and they have no claim against you.

However, the agent who bought these goods is still on the hook because they are the one who entered into a purchase agreement with the vendor.

They have a right to do business with others as they choose, and they have chosen to not do business with you or the company you represent. Your relationship with the agent is of no interest or concern to them.

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