Contracts and Sales Multistate Bar Practice Exam

What is the primary purpose of an account stated?

1. To formalize a newly negotiated contract

2. To resolve disputes regarding prior transactions

3. To merge all past transactions and settle claims

4. To set future terms of payment

The correct answer is: To merge all past transactions and settle claims

An account stated serves primarily to consolidate previous transactions between parties and confirm the total amount owed as well as any adjustments that may have occurred. It acts as a final understanding or agreement regarding past dealings, ensuring both parties acknowledge the balance due, thus settling any claims related to those transactions. This process effectively merges all prior transactions into a single statement, leading to clarity on financial obligations without the need to rehash each individual transaction. By confirming that both parties accept this account as accurate, it provides a strong basis for any future collections or disputes, as it is evidence of the agreement on the state of their financial relationship. While formalizing newly negotiated contracts, resolving disputes from previous dealings, or setting future payment terms are important functions in contract law, they do not capture the essence of what an account stated entails. The focus is on reconciling and ratifying past transactions into one comprehensive account.