A vendor keeps sending me invoices; I’ve been ignoring them because I think they are wrong. Is this OK?
It seems logical that if you do not owe someone money, you should be able to ignore any bills they send you. Not so.
Under certain circumstances, a New York court can find that you are liable for a bill that you ignored, without even considering the question of whether you got what you were charged for. This is known as the “account stated” doctrine.
A court can find that an account stated exists when circumstances show that two parties have agreed to an amount owed, based upon prior transactions between them. What does this mean? Imagine that you have a business relationship with a vendor, and every month they provide you services and send you a bill. And every month, you either pay the bill promptly or you dispute the amount owed. Under these circumstances, if you get another bill and don’t contest it, a court can infer from your silence that you have agreed to pay the full amount.
If an account stated is found, you will be liable for the entire bill–you are deemed to have waived your right to contest the specific charges. Luckily, there are exceptions to this rule, such as if you can show that the bill was an attempt to defraud you.
How much time can you take to dispute a bill? Often this is covered by the contract, invoice, or purchase order. If it is not, the answer, unsatisfyingly, is that your delay in disputing the bill should not be unreasonable. Whether a delay is reasonable is based on the context. For example, is there a common practice in your industry? Or, in the past, how long did you take either to pay or dispute a bill?
Even though there are defenses, the key point here is that if you receive an invoice that you think is incorrect, say something promptly.
If someone has made a claim against you for an account stated, or if you have a customer that has not complained about its bills, but has not paid them either, give us a call. We are experienced in both prosecuting and defending actions for account stated.