“An account stated is an agreement between a debtor and a creditor that the items of a transaction between them are correctly stated in a statement rendered, that the balance shown is owed by one party to the other and that the party has promised to pay that balance to the other.”[1] Put simply, this means that if a party claiming to be owed money sends a statement showing a balance owed and the other party does not object, that party may be responsible for the amount stated. Even more simply, this means that if there is a dispute over the amount claimed to be owed in a statement, the party receiving the statement should immediately object. The objection should be in writing and specific. Silence in the face of an account stated is not golden.
Wisconsin law informs us that in an action on an account stated, “the retention of a statement of an account by a party without making an objection within a reasonable time is evidence of acquiescence in or assent to the correctness of the account.”[1] Said differently, an implied agreement to pay may be presumed from such retention. In addition, an account stated may arise where a debtor makes a partial payment on an account or accompanies partial payment with an agreement to pay the balance.[2]
To illustrate the legal theory of account stated in action, let’s briefly examine the Wisconsin case of Stan’s Lumber v. Fleming. Naturally, Stan's Lumber sells lumber. Mr. Fleming inquired whether Stan’s Lumber would provide building supplies for a home he was intending to build. Stan’s Lumber provided Fleming with a credit application which he completed and was approved by Stan’s Lumber. Shortly thereafter, Fleming began purchasing the materials from Stan’s Lumber. Stan’s Lumber regularly billed him for the materials. Fleming made some payments, but then stopped. At that time, Stan’s Lumber claimed an account balance of $33,200.99. Stan’s Lumber then continued to bill him for this balance plus the accrued financing charges. Importantly, after payments stopped, Fleming told Stan’s Lumber to be patient regarding payment, but failed to object to the account balance.
The court concluded that the evidence demonstrated a classic account stated scenario. In ruling for Stan’s Lumber, the court reasoned:
(1) Stan's and Fleming formed an initial agreement for an "open account:"
(2) Fleming ordered materials on the account:
(3) Stan's delivered the materials:
(4) Stan's billed for the materials: and
(5) Fleming made payments on the account without objection. This evidence afforded a solid basis for the jury's answer that, an account stated existed between Stan's and Fleming.
In conclusion, the essence of an account stated claim is not the presence of a dispute between the parties as to a stated balance, but rather the failure of the debtor to object to the account, disputed or not, within a reasonable time. Ultimately, Fleming’s failure to object to the account balance resulted in his loss at trial. The takeaway is that a timely objection to an account statement with a disputed balance will go a long way to defeat a claim based on the theory of account stated.
[1] Onalaska Elec. Heating, Inc. v. Schaller, 94 Wis. 2d 493, 288 N.W.2d 829 (1980).