By: Thomas S. Tripodianos Published: September 2009

Failure to dispute account stated leads to quick results for creditor.

Question. Subcontractor submitted to Contractor, and Contractor received, monthly invoices for services it performed for Contractor. Contractor did not object to the invoices at any time, except for an undocumented allegation of an oral objection. Contractor also made a partial payment against a bill. Is Contractor now barred from disputing those invoices and can Subcontractor collect on its account stated?

Answer. YES. An account stated is an agreement between the parties to an account based upon prior transactions between them with respect to the correctness of the separate items composing the account and the balance due, if any, in favor of one party or the other. It is well settled that where an account is made up and rendered, the one who receives it is bound to examine it, and, if the accounting is admitted as correct, it becomes a stated account and is binding on both parties, the balance being the debt which may be sued for and recovered by law.

Contractor and Subcontractor entered into a written agreement. Subcontractor performed under the agreement and submitted numerous bills of account to Contractor, and Contractor has not objected to any of them.

Contractor acknowledged the validity of Subcontractor's Invoices by: (1) failing to make any objection thereto; and (2) making five separate partial payments to Subcontractor.

In response to Subcontractor's arguments regarding an account stated, Contractor maintains that they raised questions in connection with the Invoices. Contractor alleges that "questions" had "been raised," and that Subcontractor's fees were "a matter of frequent discussion."

It is well established that an undocumented allegation of an oral objection is insufficient to defeat an account stated. Contractor’s fails to support his attestation that "questions have certainly been raised in connection with the Invoices" and that "the extent of the fees was a matter of frequent discussion" with and does not disclose the nature or content of those questions and discussions, i.e. whether they objected to the Invoices; nor does Contractor specify which Invoices they questioned or discussed.

Additionally, it is well established that where a partial payment is made against a bill, it acknowledges the validity of the bill, "thereby establishing it as an account stated".

You should consult with your own attorney but the following sample clauses may be helpful to include in your contracts to achieve similar results and save on potential litigation costs:

[SUBCONTRACTOR/SUPPLIER] books and records showing the account between [SUBCONTRACTOR/SUPPLIER] and [CONTRACTOR] shall be admissible in evidence in any action or proceeding as prima facie proof of the items therein set forth. The statements also create an account stated and are conclusive as to the amount owed unless challenged in the thirty days after they were sent to CONTRACTOR, [SUBCONTRACTOR/SUPPLIER] monthly statements rendered to [CONTRACTOR] shall be binding upon the undersigned (whether or not the undersigned received copies thereof) and, shall constitute an account stated between [SUBCONTRACTOR/SUPPLIER] and [CONTRACTOR], unless [SUBCONTRACTOR/SUPPLIER] shall receive a written statement of [CONTRACTOR's] exceptions within thirty (30) days after the statement was mailed to [CONTRACTOR].
The monthly statements should contain similar language on the bottom of every page,
THIS STATEMENT SHALL BE DEEMED CORRECT AND BINDING UPON YOU AND SHALL CONSTITUTE AN ACCOUNT STATED BETWEEN US, UNLESS WE RECEIVE A WRITTEN STATEMENT OF YOUR EXCEPTIONS WITHIN THIRTY DAYS AFTER SAME IS MADE AVAILABLE TO YOU.

Language consenting to the jurisdiction of the local state or federal courts, choice of law and an agreement that service of process can be made by mail is also helpful.

© Welby, Brady & Greenblatt, LLP.
All Rights Reserved. By visiting this site, you agree to our Terms of Service. For more information please read our Privacy Policy Attorney Advertising