The definition of Account Stated is, “An account stated arises when the parties have an agreement, express or implied, that the account reflects the amounts due on past transaction. An account stated means the parties have come together and agreed upon the balance of indebtedness.”

According to this definition, an account stated is a statement of a due account owing for sales and deliveries made, and reflects an amount agreed upon by both buyer and seller. Using this definition it seems logical sellers forced to sue buyers for the price of goods sold and delivered on “open account” would sue on the basis “an account has been stated.”

This type of cause of action says that since the buyer has agreed this is the amount due, he has no defense to the lawsuit for that stated amount.

This sounds simple. All a seller needs is for the buyer to agree on the amount due and he can sue for that amount with a good chance of winning. But how can you get the buyer to agree he owes the amount claimed? If he was willing to admit the amount was due he would probably pay it.

One way is by simply mailing a statement of the account. The statement generally lists all open invoices, shipping dates, amount of the bill, payments, if any, and a final balance due and payable. Many sellers with open accounts update and send these statements on a monthly basis. Besides helping keep track of the account, this “legality” is perhaps an even more important reason why they are sent.

The legal principal at top speaks of an agreement between parties. This same principle, however, goes on to state this agreement “may be implied by the sending of a statement by the creditor and the debtor’s failure to dispute its correctness. Such failure to object raises the presumption of an agreement as to correctness.”

This means a seller suing under an account stated theory merely has to show a statement was sent and the buyer did not object to it. Remember, this statement of account is not the copy of the invoice sent with, or at the same time as the delivery. Those invoices may be individually sued upon for goods “sold and delivered.” Usually they will not be enough to allege an account has been stated.

The important difference between the two is the level of proof needed by the seller. In theory, a lawsuit based upon a stated account requires the seller to merely allege the sent statements were not objected to. No proof of delivery or acceptance is required, as there is a presumption not objecting represents an agreement between parties.

Once a copy of the sent statement is produced the burden of proof shifts to the buyer to show he did, in fact, originally object to it. It is usually not enough to first claim the goods were either never received or defective. Even if it is true, unless the buyer shows he immediately objected to the statements, he has a good chance of losing.

Generally speaking, if the buyer is to claim an immediate objection it should be made in writing. In one recent New York case, the judge would not accept the buyer’s claim of timely oral objections based on that oral objections were not sufficient to overcome the presumption on the agreement.

The appeals court disagreed and held, “Evidence of oral objection to an account rendered is relevant and competent to rebut an inference of an agreement by acquiescence.” That’s fine, but don’t forget this buyer had to go through the expense of an appeal before being allowed to prove his defense. You should now be able to avoid this mistake.