I assumed the APPLY button wouldn't need the T&C box to be checked. A customer might not know that and do the same I did. In any case, I tried checking the T&C box and the message displayed is the message from define_checkout_one.php but no message about the coupon being applied.
Yep, if the Admin >> Configuration >> Regulations are set to true, the system will not continue and throw the error.
Knowing that you get the same coupon result either way, can help with the troubleshooting.