The doctrine of Accounts Stated is a cornerstone of commercial law. It dictates that if a business fails to object to an invoice or statement within an appropriate timeframe, this could result in the business, or individual, being liable for that amount, even if it was not technically owed. However, there exist important exceptions to this doctrine, which act as safety nets, softening the potential financial implications. Below are six notable exceptions you should be aware of:
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When there’s clear evidence of fraud or mistake, previous agreement holds no water, and the statement can be contested.
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A lack of mental capacity on the part of an entity can invalidate an account stated. This could be due to the person being underage or suffering from a cognitive disorder.
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If an invoice or statement reveals illegal transactions, it is not held as a valid account statement, nullifying the doctrine’s applicability.
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The existence of a prior agreement that contradicts the statement can make the statement indefensible. This applies even if it wasn’t raised at the time the statement was issued.
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In circumstances where there’s an obvious error or oversight, it is considered as a valid exception, under the grounds of gross mistake. This only applies to obvious issues that were not caught early in the process.
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If the accounts stated is based on an invoice for goods that never arrived or services that were never rendered, this could negate the principle of the doctrine.
These exceptions are cardinal to commercial law, serving to restrict the scope of the Accounts Stated doctrine, and can be crucial in defending against unwarranted financial liabilities. The full implications and applications of these exceptions can often be complex, requiring a nuanced understanding of commercial law. Therefore, it is key to seek the right legal counsel in commercial matters.
For a deeper analysis of these exceptions and more, you might want to look into this article published by Davidoff Hutcher & Citron LLP: What are 6 Important Exceptions that Soften the Accounts Stated Doctrine?