Credit Card Agreements as Contracts of Adhesion
CONTRACT FORMATION UNDER FEDERAL LAW, TEXAS LAW, SOUTH DAKOTA LAW, AND UTAH LAW
Under federal law, the issuance of a credit card constitutes a credit offer, and the use of the card constitutes acceptance. Jones v. Citibank.
Under Texas law, if one party signs a contract, the other may accept by his acts, conduct, or acquiescence to the terms of the contract, making it binding on both parties. Id.; see also Benser v. Citibank (S.D.), N.A., (concluding appellant's use of credit card and payments to account showed he understood obligation to bank and contract had been formed).
Under South Dakota law the use of an accepted credit card or the issuance of a credit card agreement and the expiration of thirty days from the date of issuance without written notice from a card holder to cancel creates a binding contract.
But in Utah, the law governing entry into and enforceability of loan contracts and credit card agreements differs.
Utah has a general statute of frauds that requires loan contracts to be in writing and signed by the party to be charged. The statute does provide for a credit card exception, but for a creditor to take advantage of this exception, certain conditions have to be met.
To be enforceable under the Utah statute of frauds, the credit terms must still be in writing (thus precluding oral contracts); the document containing them must have been provided to the defendant; and the document must expressly state that the terms become effective upon use of the card or other form of account utilization. The credit card exception essentially codified contract-formation under common-law principles applicable to contract that are not signed and thus not executed in the traditional sense of the term. But it is also more exacting, which has implications for the creditor’s burden of proof in debt collection litigation.
When a lender or its assignee sues, it must prove up the contract language to show that it met the statutory mandate; it must prove that the card agreement was mailed or otherwise furnished to the defendant, and that the defendant utilized the account to incur debt after receiving the agreement.
Thus, under Utah law – contrary to South Dakota law – the contract does not go into effect automatically if the Defendant does not immediately use the credit card or incur debt on the account by other means.
If the credit card debt plaintiff only produces the final account statement, and that statement does not reflect any charges, and also does not reveal the origin of the revolving balance, it should be insufficient to meet the Plaintiff’s burden of proof in two respects: (1) it does not amount to evidence of card use or account use for purchases or cash advances and therefore fails to satisfy the Plaintiff’s burden with regard to the credit card exception in the statute of frauds; and (2) the statement is conclusory because it does not substantiate the derivation of the final balance (or how much of it represents interest and principal, respectively).