Watch Out for Claims Based on an Account Stated Cause of Action
IF YOU RECEIVE AN INVOICE WHICH YOU DISPUTE, IT IS IMPORTANT THAT YOU COMMUNICATE SUCH DISAGREEMENT AND THE BASIS FOR SAME WITH THE VENDOR QUICKLY OR A COURT MIGHT FIND THAT YOU HAVE WAIVED THE RIGHT TO DISPUTE THE CHARGE AND REQUIRE YOU TO PAY IT
The recent case of Eliantte & Co. v. Davis Case No. 20-Civ-1113 (“Elliante”) decided by Judge Victor Marrero in the U.S District Court, Southern District of New York highlights the danger of not quickly disputing an invoice which you believe is improper.
In Elliante, a jeweler had sold expensive pieces of custom jewelry to a customer at a price of over $400,000.00. The customer purported to pay by check but the check bounced. The jeweler subsequently commenced litigation against the customer asserting claims for account stated, fraud, breach of contract, and conversion. After discovery, the jeweler moved for the summary judgment on various claims including a claim for an account stated. In his opinion, Judge Marrero noted that in order to recover for an account stated cause of action, a plaintiff must prove that i) an account has been presented; ii) it was accepted as correct; and iii) the debtor promised to pay the amount stated. Judge Marrero further noted that when a customer fails to timely dispute an invoice within a reasonable time after receiving same, criteria ii) and iii) can be presumed. In Elliante, the customer was unable to substantiate that he had timely objected to the invoice for the jewelry. To the contrary, the communication produced during discovery clearly indicated that the customer had made repeated promises to pay the invoice but never did. While the customer had, though his personal assistant, raised an issue regarding the functionality of one of pieces of jewelry (a watch) shortly after obtaining possession of same, no objection was made to the quality or craftsmanship of the jewelry and, moreover, the customer had provided repeated assurances that payment would be forthcoming over the course of several months.
Based on this evidence, Judge Marrero concluded that the jeweler had clearly set forth sufficient proof for an account stated and that no jury could find to the contrary. Based on the foregoing, Judge Marrero granted the jeweler summary judgment on the account stated cause of action and dismissed the claims for fraud, breach of contract, and conversion with prejudice.
One of the take home points from Elliante is that if you receive an invoice that you don’t agree with, it is important that you dispute same quickly. While disputing an invoice orally (such as in person or by telephone) may serve as defense to a claim for an account stated, it is often hard to prove that such an objection actually took place. As such, it is a good idea to express such an objection in writing, such as by e-mail. Otherwise, a court might find that you are responsible for paying same even if the good or service to which the invoice pertains was unsatisfactory.