Nolo on TenantNet
Return to: Nolo on TenantNet Index
Small Claims, Small Business
by Ralph Warner
Copyright © 1995 Nolo Press
It's almost a cliché that small business people have been among
worst hit by America's disturbing trend towards injecting the law into
relationship. Whether dealing with employees, suppliers or customers,
people must avoid countless legal minefields.
It's refreshing, then, to spot a glimmer of good news on the legal
recent widespread increases in Small Claims Court dollar limits make
an increasingly attractive arena in which to solve small business
quickly and cheaply.
Small business owners can use Small Claims Court in two main ways: to
overdue bills or to resolve disputes with customers or other businesses.
Small Claims Court is particularly cost-effective for collecting unpaid
because it eliminates the need for bill collectors and lawyers--who
as their fee, up to half of what they collect. Indeed, Small Claims
works so well
that in many courts over 60% of the cases are filed by businesses.
substantial percentage of these claims are uncontested by the defendant
know they owe the money and don't show up), little preparation or court
needed. And best of all, many defendants who don't want their credit
damaged pay voluntarily somewhere between the time they receive a final
letter threatening suit and the date the judgment is entered.
But if you think the Small Claims Court deck is stacked in favor of
small businesses to collect doubtful debts, think again. When defendants
they have a good defense and fight back, they have an excellent chance
or at least of paying substantially less than the plaintiff claims. For
in a study of 996 Small Claims cases that went to trial, the National
State Courts found that 20% of the time, the defendant won outright. In
20% of the cases, the defendant was ordered to pay substantially less
Disputes between two small businesses or a business and a customer are
common in Small Claims Court. Most involve a contract. Commonly, a
argues that goods or services were provided poorly, late or not at all.
example, suppose Ted, an independent graphic designer, sues Tip Top
because it won't pay him for redesigning its logo and newsletter. Tip
defense is that because the work was both substandard and late, the
broken and no payment is due.
If the parties don't negotiate their own solution or arrive at one
mediation, each would have a chance to present their side of the story
to a Small
Claims Court judge. A succinct and well-organized court presentation is
important. And in a close case, chances are good that the side with the
convincing written evidence will have the edge.
For example, if Ted can produce a written contract (or other documents
that a contract existed), a decent-looking sample of the redesigned
and a letter from someone with expertise in the field stating that the
or exceeded industry standards, he will be in an excellent position. Ted
also be wise to try to rebut the likely points the business will make.
example, if the design work was a few weeks late, Ted would want to
good excuse, such as the fact that Tip Top asked for time-consuming
When Ted's presentation is complete, it will be up to Tip Top to back up
version of the story. It will want to present evidence that either the
delivered so late that it amounted to a serious breach of the contract
Ted failed to meet other important contractual specifications (designed
4-color, 24-page newsletter template when the contract called for a
12-page job). Again, the more hard evidence (such as a letter to Ted
the project was over deadline and asking for immediate completion), the
Tip Top's chances.
After both parties have their say, it will be up to the judge to decide.
again, there is good news. Instead of waiting around for months, as can
regular court, the judge will either announce a decision on the spot or
out in a few days. Either way, both sides will know where they stand and
to get back to business.
The above links are connected to Nolo's on-line store where you will
find a detailed description of each product.
The selected articles originally appeared in the Nolo News and are Copyright © Nolo Press 1996 and reproduced here with permission.
If you find them of value, we encourage you to visit Nolo Press at their web site http://www.nolo.com.
If you wish to post them on-line or otherwise distribute them, first read Nolo's copyright policy.