Account stated
When you are sued, you get a summons and a complaint. The complaint lays out the causes of action–in the case of debt collection, the reasons why the debt collector things you owe them money. One of the causes (usually referred to as “counts” in the complaint) you will often see is “account stated” together with a statement that an account “has become stated between the parties.”
An account stated is an agreement between a creditor and a debtor that a stated amount is owed to the creditor as of a certain date. This agreement can be expressly laid out in a bill, credit card statement, invoice, or series of invoices. It becomes “stated” where the debtor has not made any objections to the existence or amount of the debt. It can also be expressly stated if the debtor has signed a document agreeing to pay an amount of money to the creditor. The agreement can also be implied by the circumstances, such as when the debtor has made regular payments on the debt without protest. Hall-Vesole Co. v. Durkee-Atwood Co.
The doctrine of account stated is an alternative means of establishing liability for a debt other than a showing of an express contract. Am. Druggists Ins. v. Thompson Lumber Co. In other words, It can be an easier claim for debt collectors to make.
In stating an account, two things are necessary:
- Both parties must have seen and acknowledged that there was an agreement for money owed to the creditor. WilTEL Communications, LLC v. Sunrise Int. Leasing Corp. Usually, there are prior or ongoing transactions between the creditor and debtor.
- Both parties must also agree that the amount owed is the correct amount. Hall-Vesole.
But it isn’t quite that simple.
In proving an account stated, it is not necessary to show that both parties actually examined the claimed debt. There does not need to be an express agreement to the total sum of the claimed debt. Both of the above requirements can be implied from the circumstances. If, for example, there is no objection to a statement of account of invoice for an unreasonable period of time, it can be inferred that the debtor agrees to the amount owed. Meagher v. Kavli.
Here is an example:
Bill goes through his daily mail and finds a credit card bill. He did not open this credit card, so he assumes it is junk mail or a mistake. So, he throws it away. For the next few months, he gets the same bill, but he throws them in a drawer, thinking he’ll deal with it later. All of a sudden, Bill is sued by the credit card company for non-payment. The credit card company states that it established an account stated by sending Bill multiple bills with the amount due (including interest) and past transactions listed. The credit card company argues that Bill did not object in a timely manner regarding the inaccuracy of the bills, and therefore, the account stated should stand.
There is no bright line test for how long a debtor has to object to the debt. Courts will look at the circumstances and try to decide whether the debtor’s actions show that he acknowledged the debt or not. The weight given to various arguments will vary with the circumstances. Meaher v. Kavli.. However, the party sending the statement or invoice cannot impose such a time limit on the recipient merely by, for example, inserting a clause written in the statement or invoice.
In order to successfully challenge an account stated, a person must be able to affirmatively demonstrate either fraud or mistake by clear and convincing evidence.
“Courts will look at the circumstances and try to decide whether the debtor’s actions show that he acknowledged the debt or not. The weight given to various arguments will vary with the circumstances.”
That section brings up a question that I have thus far been unable to find an answer to. I am currently using a debt settlement company (superior debt services if you were wondering)so that I can hopefully pay everything off, and as of just a few days ago I received a mailing from a law firm stating that they have filed a claim with the NAF and that a lawsuit is possible, etc.
Obviously, the only reason that this law office was even involved is due to the fact that I couldn’t pay my bills (whoever said you learn more from losing than you do from winning is a genius), and I can imagine that should I be sued and go to a court they would simply say “Mr. Blitz Fitness has not/refused to pay us money he owes.”
My question is this, is my hiring/utilization of the settlement company A) an acknowledgment of debt, and/or B) Proof that although I haven’t been able to pay, I am actively trying to pay?
As Alecia mentioned, it will depend on the circumstances. I don’t think hiring a credit counseling service or debt settlement company is an acknowledgment by itself, but if they have been making payments on your behalf, that might do it.
Thanks for the quick response, and on a Sunday no less! It’s just a nerve-wracking situation and I’m trying to devour as much information as I can.
I like this article, don’t get me wrong … but I think it could have gone a bit further. Like, how can you protect yourself against an “account stated” trap? Obviously, read all your mail and make sure your respond in a timely fashion to inaccurate or fraudulent statements. But what constitutes objection? Is a phone call to the company sending the statement good enough? Registered mail? Return receipt? How do you word the objection to ensure that you retain your rights? That sort of information would be good.
@humphrmi: Unfortunately, I don’t think we know the answer. It will depend on the circumstances. A court may find a phone call is sufficient, but I would warn against doing anything that doesn’t involve a paper trail so you can prove you objected. A return receipt could be useful, as well, to prove the creditor received the objection. As for the form, a simple “I do not think I owe this debt” is probably enough, but you may want to explain why you think you don’t.
Like many things in law, there are no hard and fast answers.
Credit Card Companies are crooks. All the schemes they pull on customers. Three years ago I was coming into financial hardship and as everyone suggested to me, I called every credit card company I had an account with and told them I was coming into financial hardship and pleaded for them to work out a lower payment with me. EVERY SINGLE ONE of them said “No. We can’t help you. You have good credit.”
Well……….three years later, I’m being sued by some of them with I’m sure others to follow. I really wish I could sue them for causing further hardship on me when I did try to work something out with them so I didn’t have to stop paying them. But, I have to eat. And, for the record, my credit card usage was not for wreckless purchases. It was to pay my mortgage. And, I don’t believe in filing bankruptcy…….as I intend to pay these people back but now here I am being sued.
And……….how can credit card companies win their lawsuits when all of their “terms” are unconscionable??!!!
We have been sued by a zombie debt collector under “account stated”, which has a longer statute of limitations (6 years) than an open account (3 years).
Under Alabama case law, collections efforts for the original debt do not constitute an account stated. It must be a new agreement, such as if you agreed to pay or settle, however if the evidence shows all efforts were on the original debt that is not an “account stated”
“An account stated is a post-transaction agreement. It is not founded on the original liability, but is a new agreement between parties to an original account that the statement of the account with the balance struck is correct and that the debtor will pay that amount. It is as if a promissory note had been given for the balance due.
In Mobile Rug & Shade Co. v. Daniel, 424 So. 2d 1332, 1333 (Ala. Civ. App. 1983)(quoting Martin v. Stoltenborg, 273 Ala. 456, 459, 142 So. 2d 257, 259 (1962)), this court noted that “‘[a]n account stated is not founded on the original liability, but on the defendant’s admission that a definite sum is due in the nature of a new promise, express or implied.’” In that case, the court noted that, according to an affidavit, the plaintiff sought to recover upon the original liability rather than upon a new promise by the defendant to pay the total account balance. The court noted that the evidence indicated only an original promise to pay, not a new promise to do so. Thus, the court determined that the claim in that case was in the nature of one for an open account and not for an account stated. Id. The court in that case determined that the three-year statute of limitations barred an action alleging an open account. The situation presented in the present case is almost identical to that in Mobile Rug & Shade, supra, in that the evidence indicates that Cavalry is also seeking to recover upon the original liability.
“An account stated is a post-transaction agreement. It is not founded on the original liability, but is a new agreement between parties to an original account that the statement of the account with the balance struck is correct and that the debtor will pay that amount. It is as if a promissory note had been given for the balance due.
It seems to me most cardholder agreements would prohibit formation of subsequent agreements that are not in writing.