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Words, Phrases and Maxims/A/[A0322] ACCOUNT STATED

[A0322]

ACCOUNT STATED

Account stated is 'an agreement by both parties that all the items are true'. (Per Mansfield CJ in
Truman v Hurst 1 TR 42) See also 13 CLJ 165. Account stated is an agreed balance of account (ie) an
account which has been examined and accepted by the parties. Willis v Jerneegaw (1741) 2 Atk 251 An
entry in an account book showing the balance due signed by the debtor, amounts to an 'account stated,'
though the account is not of mutual claims and there are only credit and debit entries showing calculation
of interest and payments made. It is not material that some of the items brought into the account were
statute barred. 1945 NLJ 464 =48 Bom LR 727. Account Stated, in the true sense of the term (and in
the sense employed in the Limitation Acts) is, where several items of claim are brought into account on
either side, and being set against one another, a balance is struck and the consideration for the payment
of the balance is the discharge on each side, each party resigning his own rights on the sums he can
claim in consideration of a similar abandonment on the other side and of an agreement to pay, and to
receive in discharge the balance found due. [ Nahanibai v Bhau (1883) 7 Bom 414 ; Ratanchand
Damrumal v Khet Singh AIR 1954 Madh Bharat 11 ; Gharabharan v Sri Radhakishan AIR 1958 All 313
AIR 1958 All 315 ; Chhogalal v Kanayalal AIR 1958 Raj 303 AIR 1958 Raj 304 ; Smt. Sukhdei v M/s
Naipal Ram Jagannath Prasad AIR 1974 All 408 AIR 1974 All 412 ] An account is said to be stated only
when there have been cross demands between the parties and the balance struck then becomes the
consideration for the discharge on either side. Such an account stated amount to a new contract and is
a substantive cause of action. Ishar Das v Harkrishan Das 35 Ind Cas 577=148 PWR 1946, Per Justice
Shadi Lal; The State of Bihar v Ram Ballabh Das Jalan AIR 1960 Patria 400, 404. When an account is
stated it ceases to be an an account current.
LL
An account containing several items of claim on both sides set against one another so that a balance
can be calculated and paid. An account between two parties containing entries on both sides where a
set-off has been effected and the balance agreed to be the only amount payable. The consideration for
the promise to pay the balance is the discharge of the items on each side: Siqueira v Noronha [1934] AC
332 . At common law it is called insimul computassent (they accounted together), being the 'real account
stated': Re Laycock v Pickles (1963) 4 B & S 497 ; 122 ER 546. A mere acknowledgement of a debt,
where there in fact may be no debt, consideration, or binding promise: Siqueira v Noronha [1934] AC 332
. A promise to pay may be inferred by law from an account statement. Such an admission is of evidential
value only and the existence and validity of the debt itself may be examined despite the admission: Perry
v Attwood (1856) LJQB 408 . An account consisting of a claim by one party which the other party has for
valuable consideration agreed to accept: Irving v Veitch (1837) 3 M 7 W 90; 150 ER 1069.
ALD
An account between two parties which consists of items, which have been expressly or impliedly agreed
between the parties as entries which have properly appeared on the account. Any balance shown, is
likewise agreed as correct. (Klein, Dictionary of Banking)
JD
Brennan J in Bank of New South Wales v Brown (Official Liquidator of Tom the Cheap (WA) Pty Ltd
(1983) 45 ALR 225 held that:

To ascertain from these cases whether and in what manner a debt for interest is extinguished when it is
capitalized by an account stated, an ambiguity in the meaning of 'account stated' should be resolved.
3

An account stated may take either of two forms ( per Jordan CJ in Commonwealth Dairy Produce
Equalization Committee Ltd v McCabe (1938) 38 SR (NSW) 397 at 401 ). The two forms are explained
by Viscount Cave in Camillo Tank Steamship Co Ltd v Alexandria Engineering Works (1921) 38 TLR 134
at 143 :

The expression 'account stated', as Mr Jowit pointed out in his able argument, has more than one meaning. It
sometimes means a claim to payment made by one party and admitted by the other to be correct. An account
stated in this sense is no more than an admission of debt out of court, and while it is no doubt cogent evidence
against the admitting party, and throws upon him the burden of proving that the debt is not due, it may, like any
other admission, be shown to have been made in error. This is the plain result of the authorities, such as Perry v
Attwood (6 E and B, 691) and Laycock v Pickles (4 B and S, 497). Where the transaction is of this character, it
makes no difference whether the account is said to be stated or to be 'stated and agreed; the so-called agreement
is without consideration and amounts to no more than an admission. There is a second kind of account stated
where the account contains items both of credit and debit, and the figures on both sides are adjusted between the
parties and balance struck. This is called by Mr Justice Blackburn, in Laycock v Pickles, supra, a 'real account
stated', and he describes it as follows: 'There is a real account stated, called in old law an insimul computassent
that is to say, when several items of claim are brought into account on either side, and being set against one
another, a balance is struck, and the consideration for the payment of the balance is the discharge of the items on
each side. It is then the same as if each item was paid and a discharge given for each, and in consideration of that
discharge the balance was agreed to be due.

Mr R M Jackson, in The History of Quasi-Contract in English Law (Cambridge, 1936) at 110, describes
the former kind of account stated as admissions, the latter as contracts: 'The latter [he observes] should
be discussed within the body of contract law, perhaps the most convenient place being in proximity to
Accord and Satisfaction.'
Although the former kind of account stated, being an acknowledgment of the debt, infers a promise
to pay (per Viscount Haldane in the Camillo case at 137), the existence of the debt can be rebutted (
Siquira v Noronha [1934] AC 332 at 337 ). The acknowledgment does not discharge or require the items
on either side of the account, whatever their character, as consideration for a new liability created in their
place. Hereafter, I use 'account stated' to mean the contractual kind of account stated which and the
credit for which are discharged by the account stated.
Author
In order to appreciate the technical meaning of the words 'account stated', I would like to refer to
the learned judgment of Lord Atkin in the case of Siqueira v Noronha [1934] AC 332 .

Their Lordships think that what has been forgotten is that there are two forms of account stated. An account
stated may only take the form of a mere acknowledgement of a debt, and in those circumstances, though it is
quite true it amounts to a promise and the existence of a debt may be inferred, that can be rebutted, and it may
very well turn out that there is no real debt at all, and in those circumstances there would be no consideration and
no binding promise. But on the other hand, there is another form of account stated which is a very usual form as
between merchants in business in which the account stated is an account which contains entries on both sides,
and in which the parties who have stated the account between them have agreed that the items on one side
should be set against the items upon the other side and the balance only should be paid; the items on the smaller
side are set off and deemed to be paid by the items on the larger side, and there is a promise for good
consideration to pay the balance arising from the fact that the items have been so set off and paid in the way
described.

In the same judgment his Lordship also deals with the case of Camillo Tank Steamship Co Ltd v
Alexandria Engineering Works (1921) 38 TLR 134 (1921) 38 TLR 145 and the case of Laycock v Pickles
(1863) 4 B & S 497 for the definition of account stated.
Chee Bay Hoon v Tan Chong & Sons Motor Company Ltd [1968] 1 MLJ 167 at 169 Per Pawan Ahmad
J
...From the statement of claim, it is clear that this is not a claim in respect of the underlying debts in
relation to which the account was stated. An account stated creates an independent obligation though it
does not or in any way extinguish or supersede the original debts: Fidgett v Penny (1834) 1 CM & R
108 ; 149 ER 1014.
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...The locus classicus on the law on account stated appears to be that enunciated by Lord Cave in
Camillo Tank SS Co Ltd v Alexandria Engineering Works (1921) 38 TLR 134 at 143 , where a ship
repairer rendered an account of the costs of repairs to the owner of the vessel, which account was
signed by the owner's agent and the owner claimed that the agent was not authorized to agree to the
accounts:

The expression 'account stated', as Mr Jowitt pointed out in his able argument, has more than one meaning. It
sometimes means a claim to payment made by one party and admitted by the other to be correct. An account
stated in this sense is no more than an admission of a debt out of court; and while it is no doubt cogent evidence
against the admitting party and throws upon him the burden of proving that the debt is not due, it may, like any
other admission, be shown to have been made in error. This is the plain result of the authorities, such as Perry v
Attwood 6 El & Bl 691 and Laycock v Pickles 4 B & S 497. Where the transaction is of this character, it makes no
difference whether the account is stated to be stated or to be 'stated and agreed'; the so-called agreement is
without consideration and amounts to no more than an admission. There is a second kind of account stated
where the account contains items both of credit and debit, and the figures on both sides are adjusted between the
parties and a balance struck. This is called by Mr Justice Blackburn, in Laycock v Pickles (supra), a 'real account
stated'.
It is in connection with an account stated of this character that the equitable doctrine of 'settled accounts' has to
be considered; but in the present case there were no such mutual accounts and this doctrine therefore has no
application. But there is a third class of stated or agreed accounts comprising cases where a claim has been
made by one party, and the other party has for valuable consideration agreed to accept it as correct. The
consideration may be a reduction of the claim, a consent to wait for payment, or any other matter involving a
consideration for the agreement to pay. This is a real agreed account, and according to English law cannot be
reopened except for fraud or on some other ground which would enable a party to an agreement to have it set
aside.

This statement of Lord Cave on account stated was adopted by the Privy Council in Siqueira v
Noronha [1934] AC 332 and it was set out by the learned authors of 9 Halsbury's Laws of England (4th
Ed) in para 698 as the correct statement of the law.
In 12 Atkin's Encylopaedia of Court Forms (2nd Ed) para 58, the learned authors, recognising that the
expression 'account stated' has more than one meaning, said that for purposes of pleading, it can
conveniently be divided into three classes:

1)  A mere admission of a debt. Such admission, although unsupported by consideration,


may be relied on as a distinct cause of action and is sometimes called a mere account stated.
1)  A real account stated. When several items of claim are brought into account on either
side, and set against one another, a balance is struck, and the consideration for the payment of
the balance is the discharge of the items on each side. It consists of mutual debits and credits,
including items which would otherwise have been statute barred through lapse of time, and can
properly be described as a settled account, although that term is commonly used to describe this
kind of account when it is set up by way of defence to an action of an account. Where an
agreement is part of a real account stated, this must be alleged.
1)  An account stated for valuable consideration. This class arises where all the items in
the account are on one side only, and the consideration for agreeing the account is extrinsic, for
example the giving up by a repairer of his lien over goods, or a consent to wait for payment, or a
reduction in the amount of the claim. The consideration must be specifically pleaded.

Gobind Lalwani v Basco Enterprises Pte Ltd [1999] 3 SLR 354 at 356 Per Chao Hick Tin J

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