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MDLaw, Attorney
Category: Business Law
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I have been threatened with a lawsuit by a debt collector trying

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I have been threatened with a lawsuit by a debt collector trying to secure payment for credit card debts incurred by my company. They have not named my company in any action and neither the credit card company or the debt collector have presented evidence that I assumed/signed a contract accepting personal liabiliity for any debt incurred by my S-Corp. I originally signed a contract with the Credit card company before 2000 and was conscious of the fact that I would not be personally liable for any company debts.

I have since read that these agreements may change periodically with the cardmember/business being advised of those changes by changes highlighted in the agreement sent out with a regular monthly statement and that failure to take issue with those changes is a defacto acceptance of the changes.

If the credit card company cannot/will not provide proof that I did not accept personal liability can the debt collector reasonable win a judgement against me for those company debts?

If appropriate can you clarify the significance of the "Account Stated" v. Written Card Contract? In the communications from the debt collector there is no reference to either.
Hello and thank you for using the JA website. I look forward to assisting you today.

You appear to be asking two questions here, correct? You are asking if the chances are good that they will be able to win a judgment and then you are also asking about the significance of the contract. What do you mean by "account stated v written card" contract? From where are you getting those terms?

Customer: replied 4 years ago.

A site called creditinfocenter cited the following:

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.

Quiz - What Type of Contract?

(answers below)

  1. Defendant is indebted to Plaintiff for goods and services plus contract interest purchased on an open account on a theory of account stated.

  2. The Defendant owes a sum of $XXXX.XX dollars to Plaintiff for charges and/or cash advances incurred on a credit account as evidenced by the affidavit.

  3. The defendant was indebted to Providian Bank and failed to make payments.

  4. The defendant entered into a contract with the Plaintiff.


  1. Account stated.

  2. Most likely it would be an account stated, but without looking at the affidavit it's tough to know. Here's a typical affidavit of debt. It's usually possible to get the affidavit thrown out. If the affidavit is thrown out, then the Plaintiff must produce the contract.

  3. No method of contractual indebtedness was stated, so this would most likely be assumed to be a written contract.

  4. This assumed a written contract.

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, XXXXX XXXXX very short period with very few transactions. Therefore, the contract AND the statement of account are required (proof of the length of the debt).

Are you asking me to explain that info to you from that website?

Have they already sued you? When did you last use this credit card, Ian?

Customer: replied 4 years ago.

As stated, a lawsuit has been threatened. I have not used the CC for over 6 months.

I'm not after an explanation about the asked from where did I learn of those terms. My question remains whether these terms (previously unheard by me) are important issues in determining the validity of a credit card debt collectors potential claim.

If they have not yet sued you, then that is why you don't see the terminology - since you haven't received a Complaint/Summons yet. That is where you would see that terminology.

To answer your question, yes, those terms are important in that it determines what needs to be proven by the Plaintiff - the creditor - in court. In one, they have to present a copy of the contract. In the other, they don't. In other words, it's a proof issue. In order to get a judgment against you, they would need to prove that the credit card was yours and used by you and that you failed to make payments. They can do that by presenting a written agreement or by presenting evidence that you used the card.They would need to show that they indeed presented you with statements of how much you owed, etc. as well.

Is this the only information you needed? If there is additional information that you need, just let me know and I'd be happy to answer those additional questions. If, however, your question has been fully answered, a positive rating is appreciated as always.

Customer: replied 4 years ago.
I don't dispute that I used the card in the course of business. However, it seems unreasonable to sue for charges incurred on a company credit card when in signing the original credit card agreement I accepted non personal liability for the card. When asked to provide a copy of the card agreement wherein I accepted any liability neither the card company nor the debt collector have provided a copy of such a signed doc.
That would be something you can request as proof or as part of discovery if they do sue you. You are entitled to ask for proof of personal liability. If you know that you signed something stating that you were not personally guaranteeing the card, then you can present that as a defense in court.

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