Mutual Account Law and Legal Definition
Mutual account means an account showing debit and credit transactions between parties on both sides of the account. When two parties enter into a mutual dealing, a mutual account is created. Under a mutual account, each party to the account takes the position of a debtor and creditor in relation to the other party. In order to establish a mutual account, the parties must have a cross demand or cross open account and an express or implied mutual agreement stating that the claims are to be set off against each other.
In Gresty v. Briggs, 127 Kan. 151 (Kan. 1928), the court observed that "Mutual accounts arise where each party has rendered services or sold articles of property to the other with the express or implied understanding that their respective claims shall, upon settlement, be offset to the extent of the smaller claim. Nor in such case is it material whether both or only one of the parties keep the accounts. The distinction lies in the nature of the transaction or transactions. The more usual definition of ''mutual accounts'' is reciprocity of dealing, charges and credits on both sides each party having a cause of action against the other”.