This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
An account stated is frequently defined as an agreement between parties who have had previous transactions of a monetary character creating the relation of debtor and creditor, by which agreement they fix and determine the amount which is due from one to the other upon the account between them.1 In some of the definitions and discussions of the subject, the courts emphasize the fact that the striking of such an account is an admission of a balance due and owing from one to the other;2 while in others the element of the agreement is emphasized,3 and the agreement thus made is distinguished from a mere admission.4 As will be seen later,5 each of these apparently inconsistent theories as to the nature of the account stated contains an element of the truth. An admission of the amount which is due and owing is necessary to an account stated;6 but such admission must be made in such a manner as to indicate the assent of the parties to the account and to amount to an implied promise by the party who is found to be the debtor upon such account to pay to the creditor the amount which is thus conceded to be due.
10 See Sec. 567 et seq.
11 See ft 2515.
1 For definitions which are in substance the same as that which is given in the text, or which emphasize certain phases of such definition, see England. Knowles v. Michel, 13 East 249.
United States. Toland v. Sprague, 37 U. S. (12 Pet.) 300, 9 L. ed. 1093.
Alabama. Jasper Trust Co. v. Lam-kin, 162 Ala. 388, 24 L. R. A. (N.S.) 1237 [sub nomine, Jasper Trust Co. v. Lampkin, 136 Am. St. Hep. 33, 50 So. 337].
Kansas. Dolman v. Kaw Const. Co., 103 Kan. 635, 2 A. L. R. 67, 176 Pac. 145.
Massachusetts. Tucker v. Columbian National Life Ins. Co., - Mass. - . 122 N. E. 285.
Michigan. Thomasma v. Carpenter, 175 Mich. 428. 45 L. R. A. (N.S.) 543, 141 N. W. 559.
Montana. Johnson v. Gallatin Valley Milling Co.. 38 Mont. 83, 98 Pac. 883.
"An account stated is an agreement, express or implied, between parties, * * * fixing and determining the amount due from one to the other on account, and, when such agreement is made, such account stated becomes a new obligation. Syl. 1, Harrison v. Henderson, 67 Kan. 202, 62 L. R. A. 760, 100 Am. St. Rep. 386, 72 Pac. 878." Dolman v. Kaw Construction Co., 103 Kan. 635, 2 A. L. R. 67, 176 Pac. 145. "An account stated must be founded on previous transactions of a monetary character creating the relation of debtor and creditor. Lubbock v. Tribe, 3 M. & W. 607; Chase v. Chase, 191 Mass. 556, 562, 78 N. E. 115." Tucker v. Columbian National Life Ins. Co., - Mass. - , 122 N. E. 285. "An account stated is defined as 'an agreed balance of accounts; an account which has been examined and accepted by the parties.' It is not necessary that there should be cross-demands between the parties, or that the defendant's acknowledgment that a certain sum is duo from him to the plaintiff should relate to more than a single debt or transaction." Merchants' National Bank v. Carmichael, - Cal. - . 173 Pac. 999 [citing. Baird v. Crank, 98 Cal. 297, 33 Pac. 63]. "The conversion of an open account into an account stated is an operation by which the parties assent to a sum as the correct balance due from one to the other." White v. Campbell, 25 Mich. 463.
Whether a transaction amounts to an account stated or not is a question which is presented in a number of different ways. By the original Statute of Limitations,7 "such accounts as concern the trade of merchandise between merchant and merchant," were made an exception to the ordinary period of limitations. However, a transaction which amounted to an account stated as distinguished from an open or current account, fell within the provisions of the Statute of Limitations.8 It was, accordingly, important in cases of this sort to distinguish between the open or current account on the one hand and the account stated on the other.
"An account stated is a document - a writing - which exhibits the state of the account between parties and the balance owing from one to the other, and when assented to, either expressly or impliedly, it becomes a new contract, Coffee v. Williams, 103 Cal. 556, 37 Pac. 504; Gardner v. Watson, 170 Cal. 574, 150 Pac 994." Merchants' National Bank v. Carmichael, - Cal. - , 173 Pac. 999.
2Lyell v. Walbach, 111 Md. 610, 76 Atl. 339.
An account stated is said to be a "mere admission that the account is correct." Lockwood v. Thorne, 18 N. Y. 285.
3Trueman v. Hurst, 1 T. R. 40; Merchants' National Bank v. Carmichael, - Cal. - , 173 Pac. 999; Dolman v. Kaw Construction Co., 103 Kan. 635, 2 A. L. R. 67, 176 Pac 145.
4McKinster v. Hitchcock, 19 Neb. 100, 26 N. W. 705.
5 See Sec. 2518 et seq.
6 See Sec. 2521 et seq.
If an action were brought upon an open account, or if an accounting were sought, the defendant could set up as a defense the fact that he and the plaintiff had examined their accounts, and had struck a balance thereon. A defense of this sort, which set up an account stated as between the parties, was a good defense to the original action, unless the plaintiff could show fraud, mistake, and the like.9
The party to whom a balance was due as a result of the statement of the account, could maintain an action upon the transaction by which the parties had settled the balance due without recurring to the items which made up the original account.10 This remedy was given by one of the common counts in the action of assumpsit known as insimul computassent.11