Account stated refers to a document summarizing the amount a debtor owes a creditor, and account stated is a cause of action in many states that allows a creditor to sue for payment. In many business contexts, creditors and debtors have lots of transactions occurring that involve frequent billing, and in these cases, the parties agree to credit and bill the other instead of signing contracts for each transaction. The creditor often sends the debtor an account stated summarizing the amount that creditor claims the debtor owes at a point in time. If an account-stated relationship has been established, the debtor must either pay the debt or challenge the charges within a “reasonable” time.
If the debtor does not pay, a creditor in many states may sue for an account stated if the debtor never challenges the costs within a reasonable time. The specifics of the cause of action vary by state, but generally, the parties must have previously conducted similar transactions and the debtor accepted or implicitly agreed to pay the debt. The sticking point often is that the debtor may never have responded to the account stated sent by the creditor. Courts find that after a reasonable time, which varies depending on the circumstances, the debtor implicitly agrees to pay the debts by not objecting to the claimed charges. However, the debtor may still be able to rebut the account stated claim after a long-period of time if they can prove some form of fraud, mistake, or other exception.
[Last updated in January of 2022 by the Wex Definitions Team]