Contracts and Sales Multistate Bar Practice Exam

What is an account stated?

1. A mutual agreement on the final balance due between parties

2. A method of terminating a contract

3. A summary of transactions without a discharge of claims

4. A contract that only considers future transactions

The correct answer is: A mutual agreement on the final balance due between parties

An account stated is a mutual agreement between parties regarding the final balance due. This concept arises when one party presents an account of transactions—often involving various charges and payments—and the other party acknowledges or agrees to that balance. This agreement typically results from previous dealings between the parties, where the previous transactions and their respective amounts are reconciled. The essence of an account stated lies in the mutual recognition and acceptance of a specific amount owed, which may include adjustments for payments made or services rendered. The other options do not accurately capture the definition of an account stated. Termination of a contract is a separate legal concept that does not pertain to the agreement of an existing balance. Similarly, while a summary of transactions can form part of an account stated, it does not fully encapsulate its nature, particularly because an account stated implies agreement and acknowledgment of a final balance rather than just a summary without commitment. Lastly, the notion of a contract regarding only future transactions does not align with the principle of an account stated, which necessarily involves an assessment of past dealings and outstanding amounts rather than future obligations.