Legal Definitions - account stated

An account stated refers to a summary of financial transactions between two parties, typically a creditor (the one owed money) and a debtor (the one who owes money), that shows the total amount due at a specific point in time. More importantly, it is also a legal concept that allows a creditor to sue for payment if the debtor has implicitly agreed to the accuracy of the balance.

This concept often arises in ongoing business relationships where there are frequent transactions, and the parties don't sign a new contract for every single exchange. Instead, the creditor periodically sends a statement summarizing all charges, payments, and the outstanding balance. If the debtor receives this statement and does not object to its accuracy within a reasonable period, they are generally considered to have accepted the balance as correct. This implicit agreement, often through silence or partial payment, forms the basis for an "account stated" claim, allowing the creditor to legally pursue the debt if it remains unpaid.

Here are some examples illustrating how "account stated" works:

• Example 1: IT Support Services

  A small business, "Tech Solutions Inc.," has a long-standing arrangement with "SecureNet IT," an IT consulting firm, for ongoing network maintenance, troubleshooting, and occasional software upgrades. SecureNet IT sends Tech Solutions Inc. a detailed invoice at the end of each month, itemizing all services performed, hours worked, and the total amount due. For several months, Tech Solutions Inc. receives these invoices, pays some, and remains silent on others without ever disputing any specific charges. If Tech Solutions Inc. then suddenly stops paying and accumulates a significant outstanding balance, SecureNet IT could file a lawsuit based on "account stated." The court would likely find that Tech Solutions Inc.'s consistent receipt of the monthly statements without objection constituted an implicit agreement to the accuracy of the charges, making them liable for the unpaid balance.

• Example 2: Wholesale Restaurant Supplies

  "The Gourmet Bistro," a restaurant, regularly orders fresh produce, meats, and dry goods from "FarmFresh Wholesalers." Orders are placed multiple times a week, and FarmFresh Wholesalers sends a consolidated statement to The Gourmet Bistro at the end of each month, listing all deliveries, quantities, prices, and the total amount owed. The Gourmet Bistro's owner reviews these statements. For over a year, they have received and paid these monthly statements without ever disputing any item or charge. If The Gourmet Bistro suddenly refuses to pay the last three months' statements, FarmFresh Wholesalers could sue for "account stated." The consistent, undisputed monthly statements would serve as evidence that The Gourmet Bistro had implicitly agreed to the accuracy of the running account balance.

• Example 3: Marketing Agency Services

  "BrandBoost Marketing" provides ongoing digital marketing services, including social media management, content creation, and online advertising campaigns, for its client, "Retail Innovations Co." BrandBoost Marketing sends Retail Innovations Co. a comprehensive monthly statement detailing all services rendered, advertising spend, and the total fee. Retail Innovations Co. receives these statements for several months, makes partial payments, and never raises any concerns about the accuracy of the services or the billed amounts. If Retail Innovations Co. subsequently refuses to pay the remaining balance, BrandBoost Marketing could initiate a legal claim for "account stated." The court would consider Retail Innovations Co.'s consistent receipt of the statements without objection, and their partial payments, as evidence of their agreement to the accuracy of the account, obligating them to pay the outstanding debt.