What is a Claim for Account Stated?
Our Pittsburgh lawyers often come across claims for "account stated" filed along side a count for for breach of contract. This happens when the debt collector claims numerous items that are payable (allegedly), such as interest, late payments, and other charges, but it's not clear from any one contract exactly how those items became due and payable.
Recovering the Amount "Stated"
Account stated is a short-form way of claiming one amount due, without having to prove an itemization, or how each item on the list had been specifically agreed upon -- via written contract on paper, or text, email, or smoke signal! It relieves the debt collector's duties to to prove a "meeting of the minds" as to each line item. That said, to get the benefit of this short cut method of proof - to get paid for the total amount "stated" - the creditor must prove three things:
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- Prior transactions between the parties that create a debtor-creditor relationship;
- An express or implied agreement between the parties as to the amount due; and
- An express or implied promise extended by the debtor to pay the amount due -- even if it includes numerous particulars on which the parties may not have expressly agreed.
Meeting all three elements establishes the creditor's right to be paid for one lump sum as simply "stated."
Rationale Behind "Account Stated"
This theory only applies when the parties' conduct shows the amount at issue is not in dispute. Here is how the superior court of Pennsylvania described an "account stated" in JOSEPH A. BERKOWITZ INTERIORS, INC. v. KAMENITZ, No. 283 EDA 2018 (Pa. Super. Ct. Sept. 26, 2018):
"[T]he gist of [an account stated] consists in an agreement to, or acquiescence in, the correctness of the account, so that in proving the account stated, it is not necessary to show the nature of the original transaction, or indebtedness, or to set forth the items entering into the account." David v. Veitscher Magnesitwerke Actien Gesellschaft, 35 A.2d 346, 349 (Pa. 1944). "Where the evidence tending to show the statement of account is not in dispute, the question as to whether the transaction amounts to an account stated is for the determination of the court." Id.
There, the lower court dismissed a claim for "account stated," deciding the amount at issue was not without dispute. Hence, there was a question as to whether the transaction amounts were accurate. The superior court agreed and dismissed the claim for account stated.
What, Then, is a Valid Claim for "Account Stated"?
A common example is an agreement between the supplier of goods and services to a customer regularly, over time. Let's say, a wine distributor - Happy Wine - provides numerous cases of wine to Benny's Restaurant for several years.
However, the amount of wine purchased each week depends on several factors, such as the season (whether Benny's waterfront seating is open), or whether a special function is taking place. At the outset, years ago, the parties had a crude understanding as to cost per case of wine, but it went up periodically over the years with inflation. Plus, Happy Wine charged more for rush deliveries, and has done so monthly, for years. Each month, Benny's pays the entire invoice from Happy Wine's invoice without question.
Here, with a multi-year history -- with all charges being invoiced and paid without question -- a theory of account stated would apply. In other words, the parties' conduct establishes the amount "stated" is accurate - or not in dispute.
But what are some examples where the account stated theory is asserted wrongly?
"Account Stated" Claims Coming Up Short
Each Pittsburgh lawyer in our groups sees "account stated" claims come up short, often having been filed out of desperation. The two main areas involve (1) credit card debt collection, and (2) construction or home improvement disputes. Let's talk about these individually.
1. Improper Credit Card Debt Collection
Credit card companies are notorious for misplacing the original credit card agreement with the debtor. There are many potential reasons for this. Yours truly would argue, the credit card companies are too busy counting their money, making three percent off every transaction from the merchant and charging exorbitant interest and "late fees," such that they've already profited fully by the time a claim goes into collections for non-payment.
Whatever the reason, the original application for a credit card can rarely be produced. With this, the bank or credit card company will pursue not only "breach of contract" during debt collection for non-payment of credit card debit. It will also allege a theory of "account stated" to collect on credit card debt. But is this appropriate? The answer is, most often: no.
Key Difference From Benny's...
In the Benny's case, above, Benny's paid off its wine bill each month without question, proving there was no dispute over the list of charges. See JOSEPH A. BERKOWITZ INTERIORS, INC.,above.
But in the typical credit card case, the debtor gets behind (way behind) by only making the minimum monthly payment each month -- but not because debtor believed the charges on each monthly statement were accurate. Rather, most often, the debtor simply can not afford to pay the entire balance and only pays the monthly minimum, mostly likely to avoid damage to her credit score from a dreaded 60 day or 90 day late payment blemish.
2. Questionable Building Contractor Invoices
The other common claim for "account stated" -- which is defective -- is one for non-payment of home improvement or commercial construction. In each instance, there should have been a written contract at the outset, but the contractor engaged in confusing change orders, to the point where it appeared an "account" had formed. In reality, there was one contract, that the contractor modified, either from underbidding the job, or from tacking on new expenses during the life of the project.
None of this amounts to a claim for "account stated," because there was no prior transactions between the parties that created a debtor-creditor relationship.
Statute of Limitations For "Account Stated"
There is a four year statute of limitations for a claim for account stated in Pennsylvania. See 42 Pa. C.S.A. § 5525.
