Account stated
October 15, 2009 04:21 PM Filed in: Contracts
| Account
Stated
One rule of contract law that's useful to know, and
that can come into play each time an invoice is
issued, is "account stated."
The Restatement (Second) of Contracts (1981) (the "Restatement") defines "account stated" as follows:
(1) An account stated is a manifestation of assent by debtor and creditor to a stated sum as an accurate computation of an amount due the creditor. A party's retention without objection for an unreasonably long time of a statement of account rendered by the other party is a manifestation of assent.
(2) The account stated does not itself discharge any duty but is an admission by each party of the facts asserted and a promise by the debtor to pay according to its terms.
Restatement § 282. Comment b to § 282 states, "[u]sually it is the creditor who submits the statement, but it may be the debtor who does so. In either case, the recipient's assent may be inferred from his conduct. . . . How long a time is unreasonable is a question of fact to be answered in light of all the circumstances." Id., cmt. b. Comment c states, "[a]n account stated does not itself result in discharge, but operates as an admission of its contents for evidentiary purposes. It also operates as promise to pay. . . . If it is in writing it may also satisfy the Statute of Frauds. In the absence of a requirement of a writing, however, an account stated may be oral." Id., cmt. c.
Ohio courts recognize the account stated rule. See, e.g., Hamilton Farm Bureau Coop., Inc. v. Ridgway Hatcheries Inc., Marion App. No. 9-03-45, 2004-Ohio-809 (click here). The Hamilton Farm Bureau case involved a dispute over finance charges on late payments. The finance charges represented a term that was added to the original contract, pursuant to R.C. § 1302.10 (click here), but the debtor, Ridgway Hatcheries, did not object to the finance charges in a timely fashion. The trial court granted summary judgment in favor of the creditor, Hamilton Farm, and the appeals court affirmed. The appeals court held:
Ridgway Hatcheries continued to pay on the monthly statements, at least as to the principal, and continued to order goods from Hamilton Farm despite the inclusion of the added term for finance charges. Ridgway Hatcheries failed to make any objections as to the term for finance charges until approximately a year after the term appeared on the monthly statements, and then only objected after receiving written correspondence from Hamilton Farm attempting to recover the balance due on the account. Such inaction by Ridgway Hatcheries constitutes an acceptance of the added term of finance charges to the contract between the parties and also constitutes an agreement between the parties as to the amount of the account stated. Ridgway Hatcheries was under a duty to examine its monthly statements for incorrect accounting and its lack either to do so or to object to such is acquiescence on the part of Ridgway Hatcheries to the new terms of the contract.
2004-Ohio-809, at ¶18.
Being mindful of the account stated rule, and making timely, appropriate, written objections to statements of account that differ in some respect from what you understand the parties' agreement to be, can be useful in avoiding the application of the account stated rule against you.
The Restatement (Second) of Contracts (1981) (the "Restatement") defines "account stated" as follows:
(1) An account stated is a manifestation of assent by debtor and creditor to a stated sum as an accurate computation of an amount due the creditor. A party's retention without objection for an unreasonably long time of a statement of account rendered by the other party is a manifestation of assent.
(2) The account stated does not itself discharge any duty but is an admission by each party of the facts asserted and a promise by the debtor to pay according to its terms.
Restatement § 282. Comment b to § 282 states, "[u]sually it is the creditor who submits the statement, but it may be the debtor who does so. In either case, the recipient's assent may be inferred from his conduct. . . . How long a time is unreasonable is a question of fact to be answered in light of all the circumstances." Id., cmt. b. Comment c states, "[a]n account stated does not itself result in discharge, but operates as an admission of its contents for evidentiary purposes. It also operates as promise to pay. . . . If it is in writing it may also satisfy the Statute of Frauds. In the absence of a requirement of a writing, however, an account stated may be oral." Id., cmt. c.
Ohio courts recognize the account stated rule. See, e.g., Hamilton Farm Bureau Coop., Inc. v. Ridgway Hatcheries Inc., Marion App. No. 9-03-45, 2004-Ohio-809 (click here). The Hamilton Farm Bureau case involved a dispute over finance charges on late payments. The finance charges represented a term that was added to the original contract, pursuant to R.C. § 1302.10 (click here), but the debtor, Ridgway Hatcheries, did not object to the finance charges in a timely fashion. The trial court granted summary judgment in favor of the creditor, Hamilton Farm, and the appeals court affirmed. The appeals court held:
Ridgway Hatcheries continued to pay on the monthly statements, at least as to the principal, and continued to order goods from Hamilton Farm despite the inclusion of the added term for finance charges. Ridgway Hatcheries failed to make any objections as to the term for finance charges until approximately a year after the term appeared on the monthly statements, and then only objected after receiving written correspondence from Hamilton Farm attempting to recover the balance due on the account. Such inaction by Ridgway Hatcheries constitutes an acceptance of the added term of finance charges to the contract between the parties and also constitutes an agreement between the parties as to the amount of the account stated. Ridgway Hatcheries was under a duty to examine its monthly statements for incorrect accounting and its lack either to do so or to object to such is acquiescence on the part of Ridgway Hatcheries to the new terms of the contract.
2004-Ohio-809, at ¶18.
Being mindful of the account stated rule, and making timely, appropriate, written objections to statements of account that differ in some respect from what you understand the parties' agreement to be, can be useful in avoiding the application of the account stated rule against you.
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