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Demystifying 'Account Stated' Claims in Creditor Lawsuits

Understanding the 'Account Stated' Claim

In the realm of creditor-debtor disputes, one term you'll frequently encounter is the "account stated" claim. It's a concept that has its roots in the Uniform Commercial Code (UCC), which governs transactions of goods between merchants. But what exactly does it mean?

An "account stated" is essentially an agreement between parties acknowledging a balance due. To establish this claim, a creditor must demonstrate with clear evidence that the debtor received periodic statements of account and retained them without objection, thus implying an agreement that the stated balance is correct.

The Fox Linen Service Case: A Real-World Example

Some years ago, I analyzed Fox Linen Service, Inc. v. Brentwood Golf & Country Club, Inc., which involved a key issue of whether the plaintiff successfully proved an "account stated" claim within the context of a linen service contract. The plaintiff needed to show that the defendant received and kept the invoices without protest, suggesting acceptance of the debt amount.

Where Businesses Often Fall Short

In my experience, businesses frequently struggle to substantiate these claims. Proving that bills were mailed and retained, and that a new agreed-upon amount, or "account stated," exists, often lacks the necessary rigor of evidence.

Account Stated Law in Collection Practice by Jesse Langel

Top 10 Takeaways from the Above Blog: Navigating 'Account Stated' in Debt Collection

  1. Cause of Action Defined: A cause of action is the legal ground on which a party files a lawsuit. In debt collection, an 'Account Stated' serves as such a ground, allowing creditors to sue for alleged debts.

  2. Account Stated Explained: It's a mutual acknowledgment of debt between a debtor and creditor, where the debtor agrees to pay a specified amount. This forms a new contract based on the acknowledgment of the debt amount.

  3. Use in Debt Collection: Creditors use 'Account Stated' to establish a debtor's liability for a debt based on their acceptance of account statements. This can lead to judgments against debtors who don't respond to claims.

  4. Legal Requirements: To claim 'Account Stated,' a creditor must prove the debtor received and accepted the account statements and promised to pay the stated amount.

  5. Silence as Admission: Not disputing a charge within a reasonable time can be seen as agreeing to the debt. However, the law prohibits assuming consent from silence, so creditors must prove assent.

  6. Collector's Strategy: Creditors prefer 'Account Stated' to avoid proving how debt amounts are calculated and to sidestep the need for the original contract.

  7. Default Judgments: In New York, 'Account Stated' claims can result in default judgments if the collector can prove the debtor received and didn't object to the account statements.

  8. Signed Agreements Unnecessary: A signed credit agreement isn't required to prove 'Account Stated', but a preexisting relationship indicating the debtor's liability must be established.

  9. Historical Context: 'Account Stated' originated to settle accounts between parties with ongoing financial interactions, like merchants and customers.

  10. Implied vs. Express Contracts: While 'Account Stated' is an implied agreement arising from a preexisting relationship, a breach of contract claim refers to a failure to honor a written agreement.

Why This Matters for Consumers

Understanding the nuances of 'Account Stated' is essential, particularly if you find yourself facing a lawsuit from a creditor. It's not just about whether you owe money; it's about whether the creditor can legally prove your agreement to the debt amount they claim. Your defense may hinge on challenging their evidence, especially if you never explicitly agreed to the amount due or if there was no proper communication of the debt. Knowing the ins and outs of 'Account Stated' can significantly affect the outcome of your case.

Conclusion: Your Legal Rights and Next Steps

Armed with the knowledge of what constitutes an 'Account Stated' claim, you are better positioned to protect your interests in a debt collection lawsuit. Remember, silence isn't always agreement, and the burden of proof lies with the creditor. If you are embroiled in such legal disputes or have received questionable account statements, do not hesitate to assert your rights. Reach out for a comprehensive consultation where we can review your situation, provide expert advice, and craft a defense strategy that ensures your financial integrity is upheld.

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