Common Cases in Small Claims Court

Excerpted from Small Claims Court Guidebook (Entrepreneur Press)

As a business proprietor, you’re much more likely than most to either turn into a defendant in a little claims case or have to bring a little claims case to court. Small claims courts are courts of limited monetary jurisdiction that are used for the resolution of smaller disputes. The monetary limit in small claims courts varies by state. On the reduced end, Massachusetts allows awards as high as $2,000, while on the top quality, Tennessee allows awards as high as $25,000 in a few of its counties. Generally, most states allow awards of around $3,000 to $5,000.

Common Case #1: Contract Disputes Contract disputes appear frequently in small claims court. Many small businesspersons end up in small claims court over this matter eventually. Let’s examine how exactly to pursue and defend a contract dispute in small claims court.

It is important to separate contract disputes into two categories. First are contract disputes with a participating plaintiff and a participating defendant. Second are simple collection matters. Collection matters have become common in small claims court. In an average collection action, there’s a dynamic and participating plaintiff, however the defendant isn’t participating. The defendant in a collection action does not have any defense to the dispute and hardly ever appears. Collection actions are simply just a stepping stone where a plaintiff advances an overdue bill to a court judgment. We’ll cover collection actions first because they’re generally simpler, and we’ll discuss contractual disputes. Then we’ll talk briefly about collecting on loans, which are actually a kind of contract.

Collection Actions As mentioned, a collection action is set up by a plaintiff to get an unpaid bill or invoice. You should think about collection matters more as a pursuit than as challenging. From that perspective, they change from regular contract disputes. The plaintiff’s goal in this action is to advance the problem to a judgment. After the plaintiff includes a judgment, they (or it, because plaintiffs in collection actions are very commonly business entities) may use the judgment to get your debt through garnishment or levy.

In a collection matter, the underlying legal theory is breach of contract. At its core, a collection action is merely one party to a contract wanting to enforce the other party’s performance. The collection plaintiff must keep this at heart: She or he must prove a contract was made, that the plaintiff performed his / her end of the contract, and that the defendant didn’t pay or surpass his / her end of the contract. Collection actions are filed by parties ranging in proportions from enormous credit card issuers to small mom-and-pop businesses.

Before proceeding with a collection action, it is best to attempt to collect your debt through demand letters and other collection techniques. If all attempts to get your debt fail, and when you have some certainty that you could recover, then you’re prepared to bring your collection matter to small claims court. Your case ought to be lean and simple. You will want to prove the next:

  • That you (or your corporate, LLC, or partnership plaintiff) and the defendant entered right into a contract. Contract cases are easier for plaintiffs if a written contract signed by the defendant was made and is taken to court.
  • That you, the plaintiff, performed your end of the bargain. Prove this with photographs or copies of work you did, or a delivery receipt, or a statement, or copies of invoices. Anticipate to buttress your documentary evidence with oral testimony to the result that you organized your end of the bargain by performing promptly, and in every other respects relative to the contract.
  • That the defendant hasn’t paid on your debt.

Beyond that, you may suggest to the judge that the problem is merely a collections matter. If the defendant hasn’t taken care of immediately your demand letters and bills, point that out to the judge. You wish to tell a tale of an uninterested and non-participating defendant when you can. If you are lucky, the defendant won’t arrive and you ought to easily win your case. If the defendant does arrive, he or she will probably make some complaints about the standard of the task the plaintiff did; your collection matter could be a struggle in the end.

Defending a Collections Action Is a defendant’s position in a collections matter totally hopeless? Even if the defendant’s liability is completely clear, the defendant can still maneuver. A defendant’s goal shouldn’t be in order to avoid the obligation but ought to be to get the plaintiff to simply accept less. Plaintiffs routinely take 20 or thirty percent on completely valid debts. Here’s the best way to minimize your liability. Just what a defendant has in his favor may be the following:

  • The plaintiff must undertake a whole lot of work to get the entire amount of your debt. However the defendant must act early because of this to be a highly effective strategy. After the plaintiff has already been through court, the plaintiff did the majority of the work, and the defendant loses this advantage. Also, plaintiffs typically set their resolve to get after they have already been through the trouble of going to trial.
  • The plaintiff, even after she or he wins his / her case, still must collect your debt. Most folks don’t understand how hard it could be to get on judgments. Actually, many small claims judgments go uncollected. Oftentimes, collecting on the judgment requires more work and expense than winning the judgment at the tiny claims court hearing!
  • In order a defendant in a collections matter, it is advisable to act early, in the demand stage of the case. Here is the stage where you have a go at convincing the plaintiff to "compromise" the claim. You need to be ready to pay immediately when the claim is compromised. The plaintiff is only going to compromise the claim for fast money.
  • Your goal as a defendant in a collections matter is to communicate clearly to the plaintiff the next:
  • That the plaintiff will proceed through a whole lot of waiting and work to get ready the claim, serve the complaint, secure a judgment, and collect on the judgment.
  • Any defenses or counterclaims, and the financial risk to the plaintiff, all based on your unique facts.
  • That small claims decisions are always unreliable, thereby increasing the chance.
  • That the plaintiff could have trouble collecting-the most persuasive point of most. Unless your assets and stability are clear or popular to the plaintiff, it could be rather easy to convince the plaintiff that collecting on your debt is a frustrating and fruitless endeavor. You should politely claim that you will not cooperate with the assortment of a judgment (you aren’t legally necessary to cooperate; you have rights as a judgment debtor).
  • Contractual Disputes Contractual disputes change from collection disputes. A collection matter is actually about collecting: The defendant doesn’t genuinely have a case; she or he merely seeks in order to avoid collection of your debt. But an average contract dispute is, at its core, a disagreement over who breached the contract. Therefore the roles of defendant and plaintiff is to challenge one another on either the reality of the dispute or regulations of contracts. Let’s start out with just a little background on contract law.

    A contract is a legally binding exchange of promises or an agreement between parties to provide goods, money, services, or other consideration. Contracts could be oral or written. Typically, one party is to get money, however, not always. At its core, a contract requires that one party make an offer, and that the other party accept offering. After the two parties reach a "meeting of the minds," the contract is secure. Offer and acceptance will not always must be expressed orally or on paper. For instance, partial performance (like a deposit) can indicate acceptance lacking any express communication of intent to simply accept.

    Typically some consideration, or something of value, should be taken to the contract by both parties. EASILY offer to provide you with an automobile and you consent to receive it but later I renege, this is simply not a contract because you didn’t consider me. The legal idea of consideration is complex, but at its core, the doctrine of consideration simply requires that something of value get by both parties to a contract. An exception is "quasi-contract," which I’ll discuss in an instant.

    An implied contract is one where a number of the terms aren’t expressed in words. This may take two forms. A contract that’s implied actually is one where the circumstances imply parties reach an agreement despite the fact that they have not done so expressly. For instance, if you visit a dentist, you consent to pay a good price for the service. In the event that you refuse, you have breached an implied contract to cover the service, while you didn’t sign an agreement to pay a particular amount of cash.

    A second kind of implied contract is a contract that’s implied in law, also known as a quasi-contract. A quasi-contract doesn’t need a meeting of the minds; rather, this is a opportinity for the courts to treat situations where one party will be unjustly enriched were she not necessary to pay the other. For instance, say a company accidentally installs a landscape lighting system in the lawn of the incorrect house. The homeowner sees the business installing the lights in her own lawn. Pleased at the mistake, she says nothing, and won’t pay when the electrician hands her the bill. Will the homeowner be held responsible for payment? Yes, if maybe it’s proven that the homeowner knew that the lighting had been installed mistakenly, the court would make the homeowner pay due to a quasi-contract. Such a claim can be known as quantum meruit. These claims are rare, nonetheless it is good background.

    Contracts Made Invalid by the Statute of Frauds Finally, some contracts require a contract be focused on writing and signed by the party against whom enforcement is sought to become enforceable. Remember that only the party against whom enforcement is sought need sign to fulfill the statute, not both parties. This doctrine is called the "statute of frauds." The word originates from an English law passed in 1677 called the Statute of Frauds and Perjuries. All American states involve some type of statute of frauds, but every state’s statute of frauds differs. Historically, the statute of frauds required a written contract and signature in the next types of cases:

  • Contracts in consideration of marriage.
  • Contracts that can’t be performed within twelve months.
  • Contracts for the sale of a pastime in land.
  • Contracts to pay your debt of another.
  • Contracts for the sale of goods above a particular value.
  • Contracts where one party becomes a surety (acts as guarantor) for another party’s debt or other obligation.
  • Of course, each state differs slightly. For instance, California’s statute of frauds (Civil Code §1624) generally falls based on the historical guidelines above. However, California’s statute of frauds does not have any provision for contracts for the sale of goods above a particular value, but does carry a provision requiring a written contract, or other signed writing to enforce a promise to lend profit an amount higher than $100,000.

    Preparing a Contract Case: The Litigant’s Guide First, may be the contract on paper? If the contract is written, the plaintiff enjoys the upper hand and is halfway home. With a written contract, the defendant cannot impose the statute of frauds against the plaintiff. Furthermore, the defendant cannot alter the terms of the contract in his testimony (e.g., "I was only likely to create a wall three feet high, not five feet high"). The defendant cannot deny acceptance (e.g., "we were still negotiating that agreement, rather than found final terms"). Also, a written contract indicates formality for both parties, and a willingness to be legally obliged.

    When there is no written contract, the plaintiff will have to begin by establishing a contract exists. The plaintiff should point very clearly to as soon as the agreement was reached-state enough time and place, and what both parties said (e.g., "we were in the defendant’s yard on a Friday afternoon. He said ‘I consent to that price,’ and both of us shook hands. I recall the defendant had his golf bag over his shoulder").

    For the defendant, the contrary is true. With out a written contract, the defendant begins with the upper hand. The defendant can dispute the heart of the case: the terms of the contract. Or, the defendant may argue an agreement was never reached. Take into account that it really is impossible to argue an agreement was never reached in the event that you partially performed the contract. For instance, if a defendant made a partial delivery on a contract for the sale of goods, no judge in the us will think that the defendant didn’t consent to be bound to a contract.

    Another stage in a contract dispute is where in fact the meat is: the argument of who breached the contract, also to what degree. Whenever a contract is breached by one party, usually the opposing party does not have any further obligation to execute beneath the contract. Contract disputes generally devolve right into a he said-she said argument over the way the opposing parties didn’t perform. I done a case where in fact the plaintiff, a home decorator, was seeking a refund of investment property to a defendant (my client) who had manufactured some custom roman blinds. The plaintiff was dissatisfied with the blinds. The plaintiff was also seeking some consequential damages to her reputation for the allegedly botched job (we’ll discuss consequential damages in contracts cases in an instant). The defendant argued that the blinds were acceptable and that the plaintiff’s objection was to the design of the blinds, not the product quality. A lot of the discussion focused on if the blinds were up to the standards required by the contract. Ultimately, the judge ruled that the plaintiff was eligible for a partial refund, however, not a complete refund, since she received something of value, only a lesser value than what she wanted.

    Plaintiffs sometimes seek consequential damages in small claims cases. The house decorator sought consequential damages because some realtors had seen the blinds and related the indegent workmanship to her skills as a designer. We disputed that charge as factually improbable and beyond the number of damages typically allowed in contract disputes. The judge agreed. The only time that consequential damages are allowed in contract disputes is if it’s determined that such damages were reasonably foreseeable or "within the contemplation of the parties" during the contract. As a defendant, you always want to limit consequential damages by arguing that such damages weren’t contemplated rather than discussed. And, as a preventative measure, you must never consent to clauses in contracts that permit the recovery of consequential damages.

    Collecting on Loans A loan is merely a contract to settle money. The most crucial points for plaintiffs to spotlight is to show the loan either with a written document (written contracts or loan documents are always the strongest) or with proof that the loan was sent to the defendant and that partial payments were made on the loan. Continually be prepared to show an in depth statement of the payments the defendant made, if any. The tiny claims judge will be looking meticulously to be sure that you have credited the defendant for just about any sums he might have paid on your debt. As a defendant, you will need to show every payments that you made on your debt.

    Common Case #2: Landlord-Tenant Disputes Landlord-tenant disputes arise from the partnership between a landlord and a tenant, either in a commercial or residential setting. Leases certainly are a special types of contract that are governed by special rules. Our legal system views tenancy and rental security deposits as specially protected rights. Take into account that in a few states, landlord-tenant disputes aren’t heard in small claims court. Generally in most states, evictions aren’t heard because an eviction may be the termination of a very important right: the right to obtain real property. It’s much more likely though, that the tiny claims court will hear a dispute over a security deposit, harm to accommodations unit, or for back rent following abandonment by a tenant of accommodations property.

    Security Deposits Disputes over security deposits are normal in small claims courts. Generally, the total amount in dispute is significantly less than the jurisdictional limit, so these cases certainly are a good fit. Tenants have the benefit here. Understand that a security deposit hardly ever really is one of the landlord. In a way, the deposit is held in trust for the tenant by the landlord, and may only be retained in very specific instances. I’ve seen a whole lot of landlords lose very badly in small claims court. An example is a recently available Massachusetts case involved the withholding of $500 from a $1,000 deposit. The landlord claimed that the machine was left in terrible condition, and that the tenants had taken two stools. The tenant (a colleague of mine) in the settlement phase, wanted to accept $200 to stay the $500 claim. The landlord was stubborn, and probably figured that the former tenant wouldn’t normally pursue the problem. The tenant brought his case in small claims court. The landlord’s evidence was weak; he previously minimal receipts to substantiate the $500 in cleaning costs and furniture replacement. The tenant clarified that the machine was spotless and that the stools were at least 25 years old and probably worth $5. The tenant won the entire return of his security deposit. Furthermore, the Massachusetts statute allows triple damages and attorney’s fees, therefore the total judgment was nearly $3,500. The landlord appealed and lost the appeal aswell.

    Some important points to keep in mind in a security deposit dispute:

  • Regulations is privately of tenants.
  • The judge likely includes a bias and only tenants. They have a tendency to be less well off than landlords, and so are commonly abused by landlords.
  • A security deposit is property that belongs to tenants, never to landlords.
  • The handling of security deposits requires that rules and laws be carefully followed.
  • Victorious tenants in security deposit cases can generally boost the damages through the use of statutory provisions that favor tenants.
  • Make sure the tiny claims court will hear your dispute.
  • Cases to recuperate Back Rent Actions to recuperate overdue rent following a end of a lease are normal in small claims court. These cases arise at either the finish of the word of a lease, or when the tenant abandons the house prior to the end of the lease. Cases brought at the natural end of a lease are simpler. A plaintiff landlord ought to be ready to introduce the lease into evidence, also to provide some kind of statement showing what rent was paid, and what rent had not been paid. If any security deposit was withheld, the landlord ought to be ready to offer substantial and meaningful proof that the withholding of the deposit was warranted. Defendants may use a withheld security deposit to counterclaim against a landlord.

    Cases regarding the abandonment of accommodations property are more technical. Whenever a tenant abandons accommodations property, the tenant may leave half a year or even more on a lease term. As a landlord, you can be tempted to sue for the whole remaining term of the lease. However, regulations might not afford a landlord such a generous remedy. Landlord-tenant law generally requires landlords to actively and meaningfully "mitigate their damages" by searching for a new tenant. In order a landlord, you have to show that you actively advertised the house, and showed it to potential renters. If the landlord will not demonstrate an active try to mitigate his / her damages, the defendant will keep his / her damages very low, regardless of the defendant’s breach of the rental agreement.

    Want more help winning in small claims court? Get the info you will need to execute an effective case in Small Claims Court Guidebook (Entrepreneur Press).

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