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Account Stated vs Contract Defenses in a Credit Card Lawsuit

Last Updated: October 26, 2011

In the old days, before the Internet and e-mail, a credit card agreement was signed by the consumer and sent into the bank for approval. However, these days many credit cards are issued online, and there is no signature needed. This lack of a written signed contract comes into play during lawsuits on defaulted credit card debt.

If you've been sued for a credit card debt, there are two different ways the Plaintiff can say you, the Defendant, entered into a contractual agreement with the original creditor. This is crucial, because if they say you became indebted via a contract, they will have to provide one in court in order to win.

Your method of answering the complaint will be different based on whether or not the Plaintiff is claiming "Account Stated" or "Entered into a Contract".

Why Account Stated Basis of Suit is Used by A Creditor

Most credit card companies cannot produce a contract with your signature, digital or other wise, as part of their case against you. This can get the case tossed out immediately. The easiest thing for a Plaintiff to do when suing you to declare that the contract is account stated. If they use account stated as the contractual agreement, no written contract is required as evidence. This makes it much easier to win their case.

The other big advantage to establishing an account as account stated is that the cause of action is the account stated aspect of the contract itself. If the Plaintiff is basing their claim on a contract, many times you can get the case thrown out because no cause of action was stated. If their case is based on account stated, the cause of action is built in.

Difference Between a Written Contract and an Account Stated Contract

To answer this question, we have to give you a mini legal lesson.

Classic contract law in general gives the definition of a purchase contract as: one party buys at an agreed-upon price and pays per the terms of the contract. From there, should a default occur, it's all a matter of how well the terms of the contract can be proven:

• The most enforceable contract is the one where both parties sign a witnessed, signed written agreement.
• A signed but not witnessed contract is the next best thing.
• The least enforceable contract is an oral contract, since what exactly was agreed upon is difficult to prove.
• Somewhere in the middle between a signed contract and an oral contract is the account stated contract. It assumes the use of an issued credit card means the consumer agrees to the credit card contract terms.

It should be noted, that once proved, all of the above contracts are equally legally binding. It's the difficulty of proof which distinguishes them.

How do You Know if the Plaintiff Maintains the Contract is Account Stated?

You ascertain what type of contract the Plaintiff is alleging by reading the allegations in the complaint. Remember, an allegation is every separate action the Plaintiff claims you did to harm them. The allegations are usually presented in a numbered list. The type of contract the Plaintiff is claiming is usually in the top three allegations. Based on the above information, let's see if you can tell which kind of contract is indicated in each of these allegations.

How to Approach an Account Stated Lawsuit

Here is the full Account Stated Doctrine.
Generally, an account stated is "an agreement based upon prior transactions between the parties with respect to the items composing the account, and the balance due, if any, in favor of one of the parties." To achieve an account stated, the agreement must amount to a recognition of a debt by a party, with a promise, express or implied, to pay the debt. This recognition can be established by a creditor delivering to a debtor a statement regarding the account and the amount owed. The receiver/debtor is bound to examine the statement, and if he admits it to be correct, a binding account stated is established. Once an account stated is established, it acts as an admission by both parties that the amount is due.

Stated simply, an account stated is generally established when a debtor fails to object to a bill from his creditor within a reasonable time.

Questions to Ask When Considering Defenses You Can Use to Attack the Validity of Account Stated Cases

• How can the Plaintiff prove that the statement was held by the consumer without objection?
  
  
• How can the Plaintiff prove that the consumer received the statement?
  
  
• Is it sufficient for the Plaintiff to claim that a statement was mailed, but not paid?
  
  
• The most common way to defeat an action for account stated is to show that the debt claimed is new, i.e., that there was no prior course of dealing between the parties or, at best, only a very short period with very few transactions. Therefore, the contract AND the statement of account are required (proof of the length of the debt).

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