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What You Should Know About Contract Agreements for Your Small Claims Suit

One of the most common types of case heard in small claims court involves the claim by one party that the other party breached a contract. The simplest definition of contract is an agreement that a court of law will enforce.

A breach of contract occurs when one or both parties fails to do what they agreed to do in the contract. Not every breach of an agreement can be resolved in a court, because certain agreements never grow up to be contracts and other agreements lack the basic essentials to be called a contract.

Oral contracts in small claims

A contract may be either written or oral; courts enforce rights created under both types of agreement.

The main legal problem with an oral contract is obvious — it’s very difficult to prove unless you habitually carry a tape recorder or one of those snazzy new phones that records every moment of your life and immediately transmits it to your friends so as to bore them to death in your pocket. Proving the terms of an oral agreement is difficult, unless you have witnesses.

Written contracts in small claims

Some contracts must be in writing to be enforceable. These contracts are subject to what is referred to as the statute of frauds.

The types of contracts required to be in writing include

  • Contracts that affect real property, such as buying and selling real estate, mortgages, and leases longer than a year

  • Contracts to answer for the debt of another, for instance, when the car dealer asks the “Bank of Mom & Dad” to guarantee in writing the loan to “sonny boy” or “princess”

  • Contracts that cannot be performed in less than one year

Understanding the statute of frauds is easier when you realize it refers to statutes designed to prevent one party from taking advantage of the other by some means, especially fraud or lying.

Perhaps it's easier to understand if you know that the technical name is the "statute of frauds and perjuries." All this means is that legislatures took some common contract situations and created laws to deal with them to prevent fraudulent transactions. A statute helps prevent inconsistent rulings by courts dealing with similar fact situations and gets the judge out of the business of having to determine which party is lying.

Because each state has its own statute of frauds, you need to find out if the agreement in your lawsuit is covered by your state’s law. This information will help you determine whether you have a provable case and if you do, what evidence you need to establish your case.

You can pursue all types of contract actions in small claims courts as long as you’re seeking money damages as relief.

Examples of some common contract actions in small claims court include

  • A tenant seeking the return of a security deposit

  • A home improvement contractor or other service provider trying to get paid for work performed

  • A condominium or homeowners’ association claiming dues are owed

Why not all agreements are contracts

Some agreements aren’t enforceable in court and therefore aren’t recognized as contracts:

  • Social agreements: For example, if you tell a friend to meet you for dinner at your favorite restaurant and then you don’t show up, that friend cannot successfully sue you for the inconvenience she suffered by waiting for you at the restaurant. The law does not recognize that your friend suffered any real compensable damages.

  • A contract to commit a crime: Suppose you’ve done something fairly stupid, like sitting on the opposing team’s side in your team’s colors and making derogatory remarks throughout a critical ballgame. Your actions led to physical damages, for which you sued the people who ripped the opposing colors off your back.

    Both your civil suit and the criminal prosecution against the perpetrators were thrown out in the local court on the grounds that the defendants were justified in their actions. Not wanting to let the incident go, you take out the kind of contract you sign in a dark alley to extract some extra-legal justice from the perpetrators of your injuries.

    If you contract with someone to do a dirty deed and then refuse to pay, she can’t resort to the court system to enforce the written agreement, because the underlying purpose was illegal.

Exculpatory clauses in small claims

Businesses often put clauses into contracts that say they’re not responsible for damage to your property or personal injuries you experience. These contract terms are called exculpatory clauses, and businesses use them to relieve themselves of liability for their own wrongful acts.

Courts don’t like to enforce exculpatory clauses. They’re usually held to be unenforceable because they’re against public policy. People in general and courts in particular don’t like to reward other people for their wrongful acts, especially if someone has been harmed by them.

So say you, an experienced skater, go to the ice skating rink where posted signs say that the rink owners are not responsible if you fall on the ice. In addition, before you skate you sign an agreement, called a release, which says the rink is not responsible if you fall on the ice.

You’re skating properly and you fall because, well, ice is slippery and skate blades are narrow. In this situation the exculpatory clause is enforceable because you assumed the risk involved in the activity and the owner of the rink didn’t do anything to cause you harm.

But now say you go to the same rink with the signs and the release agreement. You’re skating properly but the ice making machinery malfunctions in a part of the rink causing the ice to turn to slush. Your skate catches in the slush, and you fall and are injured. The exculpatory clause does not relieve the rink of its liability because the rink didn’t provide a safe skating surface.

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