Current Account

A current account allows parties in an ongoing commercial relationship to collect their mutual receivables in one account and settle on a single balance at the end of each period, instead of collecting them one by one. Under TCC Article 89, the agreement is invalid unless made in writing.

Key Rules (TCC Article 90)

• Entering items in the account does not, as a rule, extinguish rights of action and defence relating to the underlying contract.
• Entering a pre-existing receivable does not constitute novation unless otherwise agreed.
• Negotiable instruments are deemed entered on condition that they are paid.
• The balance determined at the end of each period is carried forward as the first item of the new period.
• Receivables that cannot be set off and money delivered for a specific purpose cannot be entered (TCC Article 93).

Balance and Objection

If no accounting period is set by contract or custom, the last day of each calendar year is the closing date. A party receiving the balance statement is deemed to accept it unless it objects within one month through a notary, by registered letter, telegram or a document with a secure electronic signature (TCC Article 94(2)).

Interest

• Interest runs on credit items from the date of entry under the contract or commercial custom.
• The parties may agree that interest is added to principal (compound interest) at intervals of no less than three months (TCC Article 96). Compound interest is permitted only in current accounts and loans that are commercial for both parties (TCC Article 8(2)).
• The compound interest rule does not apply to non-merchants.

In Practice

Current accounts are common in commercial credit relationships with banks and in distributor and dealer relationships. In disputes, whether account statements were objected to in time and whether the agreement is in writing are decisive. See Advance Interest Rate and Commercial Books.