What are small claims and how they can help with your business?

Small claims courts differ primarily from the main court system in the breadth and scope of the cases that can come before them for adjudication. Depending on your jurisdiction, the larger court system could be called district court, superior court, circuit court, or by another name entirely. 

Those courts are divided into civil and criminal court divisions that hear any number of cases, from homicide and drug charge cases to contested custody matters and divorces. They also resolve cases involving damage claims in excess of a predetermined amount, which also varies widely by state. In Tennessee, the limit is a hefty $25,000. But in Rhode Island, small claims court damages for plaintiffs are limited to only $2,500. 

These larger courts also handle appeals filed by litigants in small claim courts who believe the rulings handed down were in error.

At the other end of the spectrum are the small claims courts. Depending on where you file your petition for damages, small claims courts may be known as magistrates or justice of the peace courts. In small claims courts, litigants typically present their own cases before the magistrate or justice of the peace.  

In some jurisdictions, attorneys are barred from formally assisting in the prosecution or defense of a client in small claims court. But that doesn’t mean that you can’t seek the counsel of a legal adviser. 

Are Small Claims Courts the Better Venue? 

They certainly can be, especially for litigants who seek a quicker resolution to these matters. Even before COVID-19 further clogged the individual legal systems of our country, courts in highly populated areas were already backed up. The effects of the pandemic only made justice even more elusive for those who were damaged by others’ actions (or failures to act). 

For small business owners, taking a case to small claims court can also save them thousands of dollars in legal fees that would otherwise make it cost-prohibitive to pursue these lower-value claims. Because of these aforementioned factors, more than half – 60% – of claims are filed annually by owners of small businesses in small claims courts. In addition to lower (or nonexistent) legal fees, litigants in small claims courts pay less in court costs and filing fees than those whose cases are heard in the larger civil court system. 

How to Determine Whether Small Claims Court is the Right Choice for Your Case

Suing someone over a bad debt or a breached contract is the legal nuclear option. It should be the final step you take to resolve your matter with the potential defendant and not the first one. 

Small claims may be settled verbally if the one who allegedly caused damages agrees to the proposed resolution. However, it is always better to get any agreements in writing. That brings us to the first step for small claims court – writing your demand letter. 

What Is a Demand Letter?

The letter you write to the other party who allegedly wronged you, caused damages, and/or breached a contract will become the central focus of your case in small claims court. It should include a clear description of how the damages occurred and the cost to you and your business. Demand letters are formal documents that should be sent via certified mail. 

If you intend to file a petition for damages in small claims court, your demand letter and the recipient’s signature on the receipt will become part of the court record.

But I Don’t Know How to Write a Demand Letter!

That’s OK. Many people go their entire lives without issuing or receiving such letters, so it is quite understandable if you don’t know where to start.

Companies like getdispute.com anticipate this and provide a service to small business owners and others who need some guidance in resolving their legal claims but don’t want to fork out hundreds or thousands in legal fees.

You can choose from a variety of generic templates and modify them to fit the specifics of your claim for damages. Many disputes resolve upon receipt of strongly worded demand letters. Others can then proceed to small claims court for adjudication.