Cobalt Supply: The Full-and-Final Cheque, a 2%-a-Month Guarantee, and a Stale Account

Deposit it - but protect the balance of the claim in writing, first if possible, immediately after if not.

Analysis. A cheque marked full and final is only binding if the creditor accepts it as accord and satisfaction. Two common law points drive the outcome:

• Paying a lesser sum than is due is not consideration for a release of the debt (the rule in Foakes v Beer and re Selectmove). Cobalt can ordinarily cash a cheque and still sue for the balance.
• The exception is a genuine, pre-existing dispute: where the amount is unliquidated or bona fide disputed, payment of a lesser sum can constitute good consideration, and cashing the cheque may well discharge the whole debt.

That second branch is the danger here. Cobalt's own credit manager concedes the $9,200 claim is probably valid, so a real dispute exists - which is exactly the fact pattern in which cashing a marked cheque becomes risky. Note also that $77,200 is not a concession on the disputed amount; it is the full undisputed sum, so there is no compromise to accept. That helps Cobalt, but not conclusively.

Steps, in order:

1. Email Trellis before depositing (or the same day): state that the cheque is accepted on account only, that the $9,200 remains outstanding, and that endorsement is not accepted. Keep the acknowledgement of receipt of the cheque.
2. Deposit and record the payment against the oldest invoices.
3. Do not delete the marked cheque image - it is evidence either way.
4. Resolve the coil claim on its merits within 14 days: obtain the service ticket, confirm whether the replacement shipped, and issue a credit or reject it in writing.
5. If the $9,200 survives, issue a demand and consider whether the effort is worth the balance - sometimes the right credit call is to write off a small disputed amount to preserve a paying customer, but do it as a documented business decision, not as an accidental release.

The claim is at serious risk as pleaded.

Section 4 of the federal Interest Act provides that where a written agreement states interest as a rate per day, week or month, the agreement must also state the equivalent annual rate; if it does not, no interest greater than 5% per annum is recoverable. It applies to guarantees and to commercial agreements alike.

Applying it:

• The guarantee says '2% per month, compounded monthly' and 'says nothing about an annual rate'.
• A court would therefore likely cap Cobalt's recovery at 5% per annum simple, not 24% nominal compounded, which is roughly 26.8% effective.
• The gap matters. On an $86,400 balance over 27 months, the difference between 5% simple and 26.8% effective is tens of thousands of dollars.

Criminal rate check. Even if the clause were valid, a 24% nominal rate is well under the 60% criminal rate of interest threshold, so no Criminal Code s.347 issue arises. The problem is disclosure, not the rate level.

What to do:

1. Do not plead 2% per month without flagging the risk to counsel; expect the debtor to raise s.4 immediately.
2. Amend the template guarantee today to state '2% per month (26.82% per annum, compounded monthly)' or an equivalent annual rate, and review all other agreements that express interest in days, weeks or months.
3. Recognise the revenue impact: any accrued interest already booked on this account at the contractual rate should be assessed for collectability.
4. Serve a corrected statement of account showing the 5% alternative so the demand is not attacked as inflated.

Not necessarily - but it needs to be established before you sue.

Under the Limitations Act, 2002 (Ontario), the basic limitation period is two years from the day the claim is discovered, with an ultimate limitation of fifteen years from the act or omission. Twenty-seven months since the last payment is past the basic period on its face, so Cobalt must rely on an extension or a restart.

The acknowledgment argument. Section 13 provides that a limitation period restarts running when the person against whom the claim is made acknowledges the claim in writing and signs the acknowledgment. Doucet's email four months ago acknowledging the balance and requesting a payment plan is a strong candidate:

• It is in writing.
• It was sent by the debtor, and electronic signatures and sender identification generally satisfy the signature requirement.
• It acknowledges the debt rather than disputing it - though the email also refers to the $9,200 dispute, which a court could read as acknowledging only part of the balance.

Practical steps:

1. Print and preserve the email with full headers; confirm it came from Doucet or an authorised agent.
2. Get a fresh written acknowledgment - a signed statement of account or a payment plan signed by Doucet - which removes the argument entirely.
3. Consider a small part payment, which is itself an acknowledgment in most circumstances.
4. Calendar the limitation date from the date of the email, not from the original invoices.

If Trellis does not acknowledge further, Cobalt's recovery on the invoices before the acknowledgement window may be limited. Raise this with counsel before issuing a statement of claim.