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Should I Deposit a Check Marked “Payment in Full”?

A customer owes you money but is disputing the amount that should be paid. To your surprise, you receive a check for half of the amount in question. On the back, the customer has written “Payment in Full”. If you deposit the check, will you give up the right to ask for the other half of the disputed amount?

The answer depends on which state’s law governs the transaction. I will provide an answer based on California law.