Disputes over the quantum of money owed are not uncommon. For instance, say a subcontractor claims it is owed $500,000 from the general contractor and the general contractor disputes this amount. Say that of this $500,000, $300,000 is undisputed contract balance and $200,000 is disputed change orders. In this situation, what should the general contractor do?
The issue in this hypothetical is the $300,000 in undisputed contract balance. I am a strong believer in paying or tendering undisputed amounts so that the dispute is confined to the issues and amounts actually disputed between the parties.
Why tender undisputed funds? An appropriate tender is a tender of money without any conditions tied to the depositing of the money; the tender must be absolute and unconditional. See James A. Cummings, Inc. v. Young, 589 So.2d 950,955 (Fla. 3d DCA 1991) (finding that a written proposal to pay money after litigation commenced does not constitute a tender and a tender cannot include conditions on the money).
The check should be cash or a cashier’s check and should include interest on the undisputed money owed. “[T]he tender of a mere check does not constitute payment of cash or its equivalent and it thus makes such a tender of payment merely conditional.” See Enriquillo Export & Import, Inc. v. M.B.R. Industries, Inc., 733 So.2d 1124, 1127 (Fla. 4th DCA 1999).
The objective of the tender is to relieve the paying party from any subsequent accrual of interest owed on the money. See Morton v. Ansin, 129 So.2d 177, 182 (Fla. 3d DCA 1961); see also Ismark v. W.G.Mills, Inc., 899 So.2d 1213 (Fla. 2d DCA 2005) (“[A] tender of sums due on a date certain under a contract will stop the accrual of prejudgment interest only when the tender is absolute and unconditional.”). The effect of an appropriate tender is to cut off additional interest owed on the money from the date of the tender.
“A tender of less than the full amount due, however, is insufficient. Thus, if the amount of the tender does not include the interest to which a creditor is entitled, the tender is nugatory.” Dade County v. American Re-Insurance Co., 467 So.2d 414 (Fla. 3d DCA 1985) (internal citations omitted) (finding that tender was insufficient since it failed to include interest due on owed amount).
There is authority that a party can tender a disputed or protested amount as long as there are no conditions tied to the depositing of the money. See Gascoyne v. Bay Towne Property Owners Ass’n, Inc., 575 So.2d 671, 672 (Fla. 2d DCA 1991) (“A tender under protest will only be conditional if acceptance is predicated on the recipient being required to take some action.”). The reason to do this would be to cut off the accrual of interest on the money. However, in my opinion, tendering protested or disputed amounts should be carefully done to avoid the appearance that it is indeed a conditional payment or an insincere tender.
Whether to tender money should ideally be done under the guidance of your attorney. And, if a tender is considered, it is important that it is done properly so that you get the value of the reason for the tender–to cut off the accrual of interest.
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