Account stated
Encyclopedia
Under United States
law, account stated is a statement between a creditor
(the person to whom money is owed) and a debtor
(the person who owes) based upon a series of prior transactions that a particular amount is owed to the creditor as of a certain date. Often the account stated is a bill, invoice
or a summary of invoices, signed by the customer or sent to the customer who pays part or all of it without protest.
An account stated may also be established when the debtor retains the statement of account (for example the bill or invoice) without objecting, for an unreasonable length of time. "Unreasonable" is determined by looking at the surrounding circumstances. An account stated is in the nature of a kind of settlement between the parties, such as when a person receives a bank statement
, is capable and even obligated to check the math within a specified period of time, otherwise the account as between the parties is thus "stated." The key element is either the express agreement or an agreement implied by law under all the facts and circumstances.
between the parties which establish a debtor-creditor relationship; (2)an express or implied agreement between the parties as to the amount due; and (3) an express or implied promise from the debtor to pay the amount due.
When a creditor sues
for account stated, this sets both the debtor's liability
and the exact amount the debtor must pay, which on its surface is less complicated than claiming a debt is due and payable. An account stated may carry a longer statute of limitations
(time to file suit) than some other forms of debt, depending on the state.
In other states, such as Washington state
, "account stated" is generally asserted as a defense in a contract action. See Northwest Motors, Ltd. v. James, 118 Wash.2d 294, 304, 822 P.2d 280 (1992), citing Goodwin v. Northwestern Mut. Life Ins. Co., 196 Wash. 391, 410, 83 P.2d 231 (1938). Courts in those states characterize "account stated" as being merely a defense or a "doctrine" that prevents parties from raising issues that have already been dealt with, compromised and/or settled by the parties.
“An account stated has been defined as an agreement between parties who have had previous transactions that the account representing those transactions is true and that the balance stated is correct, together with a promise, express or implied, for the payment of such balance.” “An account stated is merely a form of proving damages for the breach of a promise to pay on a contract.”
or mistake may still be asserted to the "account stated," as with any settlement of parties to complex transactions. In situations where no account has been proven as stated, or where the existence of an agreement between the parties on a particular amount as being correct is effectively denied, all of the defenses or counterclaims that may exist with respect to the underlying transaction are preserved, and therefore may still be litigated.
Both the basic agreement and rendition of account must be proved. “[T]he rule that an account rendered and not objected to within a reasonable time is to be regarded as correct assumes that there was an original indebtedness, but there can be no liability on an account stated if no liability in fact exists, and the mere presentation of a claim, although not objected to, cannot of itself create liability. . . . In other words, an account stated cannot create original liability where none exists; it is merely a final determination of the amount of an existing debt.”
Significant litigation occurs on "account stated" issues where professional legal or medical services are involved, and the recipient of the services happens not to object in writing to bills allegedly sent and received. Professional services are required to be "reasonable and necessary" in amount by both law and ethical rules, yet these professional creditors often assert that non-objection constitutes agreement to whatever figure was billed. Especially where legal or medical relations are or may be ongoing, arguing that silence constitutes agreement to what might otherwise be an overcharge can be hotly contested by parties. At least in the case of attorney fees, voluminous litigation exists regarding what's reasonable and necessary given the professional services rendered in a particular context, and accounts are rarely "stated" in professional services caes absent facts such as where there has been payment by the alleged debtor without objection, or a final and unappealed court order for the payment of those professional fees.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
law, account stated is a statement between a creditor
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...
(the person to whom money is owed) and a debtor
Debtor
A debtor is an entity that owes a debt to someone else. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor...
(the person who owes) based upon a series of prior transactions that a particular amount is owed to the creditor as of a certain date. Often the account stated is a bill, invoice
Invoice
An invoice or bill is a commercial document issued by a seller to the buyer, indicating the products, quantities, and agreed prices for products or services the seller has provided the buyer. An invoice indicates the buyer must pay the seller, according to the payment terms...
or a summary of invoices, signed by the customer or sent to the customer who pays part or all of it without protest.
An account stated may also be established when the debtor retains the statement of account (for example the bill or invoice) without objecting, for an unreasonable length of time. "Unreasonable" is determined by looking at the surrounding circumstances. An account stated is in the nature of a kind of settlement between the parties, such as when a person receives a bank statement
Bank statement
An account statement or a bank statement is a summary of all financial transactions occurring over a given period of time on a deposit account, a credit card, or any other type of account offered by a financial institution....
, is capable and even obligated to check the math within a specified period of time, otherwise the account as between the parties is thus "stated." The key element is either the express agreement or an agreement implied by law under all the facts and circumstances.
Purpose
Arthur Corbin's influential treatise on Contracts explains the purpose and historic context of "account stated" as follows:Elements
The elements of account stated are: (1) prior transactionsFinancial transaction
A financial transaction is an event or condition under the contract between a buyer and a seller to exchange an asset for payment. It involves a change in the status of the finances of two or more businesses or individuals.-History:...
between the parties which establish a debtor-creditor relationship; (2)an express or implied agreement between the parties as to the amount due; and (3) an express or implied promise from the debtor to pay the amount due.
When a creditor sues
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
for account stated, this sets both the debtor's liability
Legal liability
Legal liability is the legal bound obligation to pay debts.* In law a person is said to be legally liable when they are financially and legally responsible for something. Legal liability concerns both civil law and criminal law. See Strict liability. Under English law, with the passing of the Theft...
and the exact amount the debtor must pay, which on its surface is less complicated than claiming a debt is due and payable. An account stated may carry a longer statute of limitations
Statute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
(time to file suit) than some other forms of debt, depending on the state.
In other states, such as Washington state
Washington State
Washington State may refer to:* Washington , often referred to as "Washington state" to differentiate it from Washington, D.C., the capital of the United States* Washington State University, a land-grant college in that state- See also :...
, "account stated" is generally asserted as a defense in a contract action. See Northwest Motors, Ltd. v. James, 118 Wash.2d 294, 304, 822 P.2d 280 (1992), citing Goodwin v. Northwestern Mut. Life Ins. Co., 196 Wash. 391, 410, 83 P.2d 231 (1938). Courts in those states characterize "account stated" as being merely a defense or a "doctrine" that prevents parties from raising issues that have already been dealt with, compromised and/or settled by the parties.
“An account stated has been defined as an agreement between parties who have had previous transactions that the account representing those transactions is true and that the balance stated is correct, together with a promise, express or implied, for the payment of such balance.” “An account stated is merely a form of proving damages for the breach of a promise to pay on a contract.”
Reasons for litigation
Nevertheless, even where account stated is recognized as a cause of action in and of itself, defenses such as fraudFraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
or mistake may still be asserted to the "account stated," as with any settlement of parties to complex transactions. In situations where no account has been proven as stated, or where the existence of an agreement between the parties on a particular amount as being correct is effectively denied, all of the defenses or counterclaims that may exist with respect to the underlying transaction are preserved, and therefore may still be litigated.
Both the basic agreement and rendition of account must be proved. “[T]he rule that an account rendered and not objected to within a reasonable time is to be regarded as correct assumes that there was an original indebtedness, but there can be no liability on an account stated if no liability in fact exists, and the mere presentation of a claim, although not objected to, cannot of itself create liability. . . . In other words, an account stated cannot create original liability where none exists; it is merely a final determination of the amount of an existing debt.”
Significant litigation occurs on "account stated" issues where professional legal or medical services are involved, and the recipient of the services happens not to object in writing to bills allegedly sent and received. Professional services are required to be "reasonable and necessary" in amount by both law and ethical rules, yet these professional creditors often assert that non-objection constitutes agreement to whatever figure was billed. Especially where legal or medical relations are or may be ongoing, arguing that silence constitutes agreement to what might otherwise be an overcharge can be hotly contested by parties. At least in the case of attorney fees, voluminous litigation exists regarding what's reasonable and necessary given the professional services rendered in a particular context, and accounts are rarely "stated" in professional services caes absent facts such as where there has been payment by the alleged debtor without objection, or a final and unappealed court order for the payment of those professional fees.