Compensatory Damages in Small Claims Contract Cases - dummies

Compensatory Damages in Small Claims Contract Cases

By Judge Philip Straniere

The goal of suing for compensatory damages in small claims court is to restore you — financially, at least — to the state you would have been in if you hadn’t gotten involved with the defendant.

The amount you can collect cannot exceed the amount you lost. In contract cases, the amount you lost is always the same as the amount you spent or would have realized had the defendant kept his end of whatever bargain or understanding you had, as the following cases demonstrate.

Time for an example: You hire the defendant to paint your house before the weekend of your daughter’s engagement party. By a written contract, you agree to pay him $5,000 if he completes the job by Thursday, and he agrees to do that.

On Wednesday, the defendant calls and says he never finished the last job he was doing and now he can’t get to your house for at least another week. To get the job done, you now have to hire another painter who agrees to do the job on short notice but for $10,000.

How much money can you collect in this scenario?

  • Is it $10,000 — what you had to pay to have the house painted by the second painter?

  • Is it $5,000 — the difference between what you paid the second painter and what you agreed to pay the defendant?

  • Or is it nothing because you really didn’t have to have the house painted and you hired the most expensive guy?

The answer is $5,000, the difference between what you paid and what you would have paid had the defendant done what he was contracted to do. You would have paid $5,000 to the first painter if he had done his job, so your damages are the additional costs you incurred because the defendant breached the contract.

Now, take the same scenario, except that the defendant actually paints your house, but uses defective paint. It rains on Wednesday, causing all the paint to wash away. You now hire the second painter for $10,000 on short notice. In this case, you can recover the entire $10,000, because your damages would be what it takes to correct the defendant’s worthless work.

You may even be able to collect $15,000 — the $5,000 you wasted on the first painter plus the $10,000 you had to pay the second painter if you can establish that the first painter made the job worse and you didn’t have to pay the extra money merely because of the rush nature of the job.

One more example: You order a new couch from your local furniture store and prepay the entire purchase price. The couch is never delivered. You can sue to get your money back. You may prefer to sue to get the couch delivered, but the goal of small claims court is generally to award you money, not goods.