Contracts Come in All Shapes and Sizes

A common type of dispute resolved in small claims court frequently involves the owner of a small business. And it is often the owner of the small business who has initiated the lawsuit, perhaps against a customer who has refused to pay for services rendered or another small business that has provided inadequate service or delivered defective products.

A typical case involves the breach of a contract. It may not seem like a contract case to a non-lawyer, because there is no long, written, legal document labeled “contract,” but contracts come in all shapes and sizes: oral ones, agreements confirmed in a two-paragraph letter and even contracts implied from the circumstances. All of these agreements can form the basis for a breach of contract lawsuit if somebody doesn’t do what he or she promised to do, such as pay a bill or deliver goods on time.

Breach of Contract

If you are a painter, a plumber, an electrician, operate another service business or own a small retail outlet, using small claims court may be an effective way for you to collect what you are owed.

First, you need to determine whether you have an enforceable contract upon which to base your suit. In legal terms, a contract must have an offer, an acceptance and something called consideration-- an exchange of something of value. It is easier to think of a contract as an agreement, or understanding, that one person has promised to do or has done for another person in exchange for another promise, a payment or something else.

For example, let’s say you are in the wholesale meat business. You sell steak, chicken and fish to restaurants. When you drop off a box of steak to a particular restaurant, you expect to be paid promptly. You may have a written agreement with your customer that specifies payment terms, you may have an oral understanding that you will be paid once a month for your deliveries or you may have been doing it for so long that you can’t remember any discussion of the terms of your arrangements, but you know that your customer pays your bill each month without fail. In each case, you have an enforceable contract that could be the basis of a lawsuit.

In the entertainment industry, movie stars often begin work on a film even though the long, written contract for their services has not been finalized or signed.

Exchange of Letters

If a lawsuit ever arose, the studio could rely on the exchange of letters with the star’s lawyer to prove that a contract existed, as long as the essential terms such as fee and screen credit have been agreed upon, even though many less important matters, such as the size of a star’s dressing room, remain unresolved.

If you provide services such as painting or interior design, you can also rely upon a legal concept called quantum meruit as the basis for a lawsuit. Even if a contract has not been signed, when one person provides services to another person who benefits from the services and didn’t object to receiving them, a court will order that person to pay for the reasonable value of the services.

If a customer has paid you with a bad check, you can sue and collect the check amount plus three times the amount of the check, up to a maximum of $500. (Read California Civil Code Section 1719.) And if the check amount is small, say $30 or less, you can still collect $100 in additional damages under the bad check law.

However, before you sue under the bad check law, you must make a written demand, sent by certified mail, asking the check writer to make good on the check. And if the check writer has stopped payment because of a good faith dispute about whether you are entitled to be paid, you won’t be awarded damages beyond the amount of the check if you win.

Klein cannot answer mail personally but will respond in this column to questions of general interest about the law. Write to Jeffrey S. Klein, Legal VIEW, The Times, Times Mirror Square, Los Angeles 90053.