Contracts in Small Claims Court

What a contract is, and what it means in court.

By far, most small claims cases arise from contracts. Contracts are the promises we live by, the grist for the mill of commerce, the oil for its wheels. There are two kinds of promises that are tested in contract disputes, express and implied. We make express promises by putting our intentions into language. Alternately, we imply promises by our actions. In some cases, implied promises may be imposed on us by rules that have arisen over centuries of commerce. For example, people generally expect that a worker who holds himself out to the public as a professional will do professional quality work. The law upholds these implied promises as strongly as those that are spoken or written.

The express promises we make are easy to spot. For example, Clarke promises to pay Tanner $200 for her used lawn tractor, and Tanner promises to deliver the tractor when she gets Clarke's cash. The same kind of promises, oral or written, comprise transactions as simple as the deal between Clarke and Tanner and as complex as the merger of two major corporations.

The promises we make that are implied from our actions are harder to identify, but make sense in a complex commercial world. Implied promises are those that arise because the transactions we make are so common that there is no need to express them, or such promises as will be supplied by the law to keep our transactions moving and fair.

When you put bills or coins in a vending machine, the candy supplier has made a promise that when you press the button, your choice will come out. The supplier of that candy bar has made a promise, or the laws require the promise, that what you get will be wholesome, edible, and without dead insects inside.

Unless someone is clearly a volunteer, the law will provide a promise to pay him or her for work undertaken and done with an acceptable level of skill. Similarly, the law will supply an implied promise to pay for lodgings at a reasonable rate, even where there is no lease or even an informal agreement. This is true even when the landlord is not in the business of renting out property.

The law presumes that when you give someone else something valuable-your labor, a concert ticket, or a night's shelter-you expect something of value in return. The contrary- that you volunteered your labor, that the ticket or lodging was a gift-needs to be shown clearly to overcome this assumption.

These implied promises supplied by the law get clearer in business situations. You are required to pay for restaurant meals and bus and taxi rides because the law says that when you eat the food or take the ride, you implicitly promise to pay for it at the regular rate. These promises that are supplied by the law are necessary to keep commerce going. They support and further the reasonable expectations of the parties to these transactions.

Of the thousands of promises we make and receive in our lifetimes, almost all are fulfilled without our even noticing them. We do begin to notice them, though, when something goes wrong. The whole area of domestic relations law, for example, depends on what goes wrong with the marriage contract.

Contracts Are Exchanges of Promises

Contracts result from the exchange of promises about some particular subject matter. The idea of an exchange of promises is important, because many of the promises we make-a promise to take out the garbage, make some telephone calls for a church committee, or "to love you forever"-do not involve this exchange, and so do not result in enforceable contracts.

The exchange of promises can be of money for goods, such as what happens during your weekly trip to the grocery store. It can also be goods for goods (such as in a traditional barter), money or property for services, or any combination of these.

The exact wording of promises can be as different as the people who make them. So, each contract will either be enforceable or not on its own terms. This is one reason you should not rely on what happened in your brother-in-law Filbert's case.

If you have an exchange of promises, and both parties 1) are clear about what they promised and have told the other party clearly what the promise is, and 2) they understand what the other party has promised, it is likely that you have entered into an enforceable agreement. The test of any contract is : Has there been a "meeting of the minds" as to the subject matter of the contract? The more specific you are about the manner in which the agreement is to be carried out, the time of performance, and/or the method of payment, the more likely it is that you have an enforceable agreement.

Not every exchange of promises results in an enforceable contract. The subject matter may be trivial ("For two cents, I'll run naked through Central Park"), or illegal ("I'll give you $50 if you will steal a new car stereo for me"). This relates to the discussion earlier about real, substantial causes of action that courts will recognize and resolve at trial.

While this rarely comes up, sometimes a person makes a promise and does not have the legal capacity to keep it. A contract with a child, anyone who is under the age of majority in your state, will ordinarily not be enforceable until after he or she reaches that age, usually 18. Banks now routinely issue credit cards to 16 and 17 year olds. The children build up big balances, and the credit card companies wait until they are 18 years old to try to collect, knowing they cannot collect as long as the kids are underage. The banks are taking some risk, because the law in most states allows the kids to disavow these debts upon reaching the age of 18. They did not have the legal capacity to make the contract to pay the debts accumulated by the card when they were minors, and now that they are adults, they can choose to reject the credit or the responsibility.

If you enter into a contract with someone who has not reached the age of majority, you do it at your own risk. This is becoming more common as children have access to more money at an earlier age.

Insane persons and those who are voluntarily or involuntarily markedly under the influence of alcohol or other drugs fall into this category, too. They are not able to contract with anyone.

Word of Mouth: Oral Contracts

Oral contracts are just as enforceable as written contracts. Assuming both parties are able to enter into a contract and there has been a "meeting of the minds," for most cases, it doesn't matter if your contract is in writing or just spoken or implied between the parties. I recently read a news story about a producer winning a multimillion-dollar judgment against an actress based on her violation of an oral contract.

The problem with oral contracts is that they are very hard to prove. What you have in your mind about what was promised may not be as certain as you would like it to be, and later on may be shaded by what actually happened when it was time to carry out the contract. Things may have come up that you never anticipated when you first made the agreement. They can result in "swearing contests" at trial, where one party swears the contract was one thing and the other side swears it was another, and the judge must choose whom to believe.

People make oral contracts all the time. Ours used to be a handshake society. Complex business deals were finalized on the basis of a handshake, and details were worked out later. Many people think commerce still runs this way. Not too long ago, a single mother of two appeared in my courtroom claiming that she had been taken advantage of by a home remodeling contractor. When their dealings began, she gave him a handwritten list of 12 instructions, most of which were described in a few words, such as, "Tear out kitchen walls." Over the following six months, she paid him more than $24,000, with no invoices or receipts for materials or labor. She thought "maybe" she had been taken advantage of.

The deal made on a handshake has not been a wise course to take since about 1860, when legal cases first started to be reported in this country. By far, one of the hardest things a judge does when deciding if there is a contract, is to try to find out what was in the minds of the parties when those minds were supposed to have "met."

Along with testifying about what terms you understand are in your oral contract, you can prove it by presenting any writings that relate to the contract and by testimony about how the parties acted after the agreement was entered. But people's actions and vague writings are subject to many interpretations. If you have an oral contract, and there exist any writings, memoranda, notes, photographs, drawings, or anything else tangible that could be examined to see what you agreed on, get it together. You may have a chance to show it and explain it to the judge. Contracts that are partially oral and partially written are classified as oral contracts.

Paper Sack Rule

One of the greatest rules of law ever devised is known as the "Paper Sack Rule": If you have an agreement, and there is a paper sack on the ground near you, pick it up and write your agreement on it.

This is especially important and helpful in service contracts. From the shade tree mechanic, whose contract consists of a soiled Work Order form purchased at the local business supply, to the multi-thousand dollar renovation project you have on your home, get it in writing if you can. If your contract is oral, what you must prove are the same things you would have put into your written contract if you had one.

One last note on types of contracts. Some contracts must be in writing to be enforceable. State law determines which ones. Most states have adopted a Statute of Frauds in some form, named after the English statute of 1677. They require that to be enforceable, certain contracts must be in writing and signed by the person who should perform what is stated in the contract. They exist to prevent fraud or trickery in areas where ordinary citizens might easily be fooled. Real estate sales, employment, and other contracts that may not be performed in a year as well as prenuptial agreements are typical. If there is any question that your contract may fall into one of these categories, you can call the court clerk or call an attorney to discuss it for free.