Usually, determining the amount to sue for is fairly easy. But for some types of cases it can be a little tricky. Before we get to the tricky part, let's start with a basic rule: When in doubt, always estimate your damages a little on the high side. Why? Because the court has the power to award you less than you request, but can't give you more, even if the judge feels that you are entitled to it. But don't go overboard–if you sue for $2,500 on a $1,000 claim, you are likely to spur your opponent to furious opposition, ruin any chance for an out-of-court compromise, and lose the respect of the judge. But if you can reasonably increase your claim amount, it's not a bad idea to do so.
Ask to amend your claim if you belatedly discover you should have requested more. If you find yourself in court and realize you have asked for too little, ask the judge to allow you to amend your claim on the spot. Some judges will do this and, at the same time, offer the defendant extra time to prepare to defend against the higher claim. Other judges will allow you to dismiss your original case and start over, which is fine as long as your time to file hasn't run out.
To arrive at the exact figure to sue for in contract cases, compute the difference between the amount you were supposed to receive under the contract and what you actually received. For example, if Jeannie Goodday agrees to pay Homer Brightspot $4,200 to paint her house but then pays him only $3,000, Homer has a claim for $1,200, plus the cost of filing suit and serving Jeannie with the papers. The fact that Jeannie and Homer made their agreement orally does not bar Homer from suing. Oral contracts are generally legal as long as they can be carried out in a year and don't involve the sale of real estate, or goods (personal property) worth $500 or more.
Write it down. Because people who are embroiled in a dispute almost always remember the details of any oral contract differently, oral contracts can be hard to prove in court. This is one of several good reasons why it is always wise to reduce agreements to writing, even if only by use of an informal note or letter agreement dated and signed by both parties.
Unfortunately, some claims based on breach of contract are harder to reduce to a dollar amount. This is often due to a legal doctrine known as mitigation of damages. Don't let the fancy term throw you. As with so much of law, the concept behind the mumbo jumbo is simple. Mitigation of damages means that the person bringing suit for breach of contract must take all reasonable steps to limit the amount of damages he or she suffers.
EXAMPLE: Tillie Tenant moves out three months before the end of her lease (remember, a lease is a contract). Her monthly rent is $950. Can Larry Landlord recover the full $2,850 ($950 x 3 months) from Tillie in small claims court? Maybe not. In many states, Larry must try to limit (or mitigate) his damages by taking reasonable steps to attempt to find a new tenant. If Larry can immediately rerent the apartment to someone else for $950 or more per month, he has suffered little or no damage (he has fulfilled his responsibility to "mitigate damages"). More typically, it might take Larry several weeks or months (unless he had plenty of advance notice, or Tillie herself found a new tenant) to find a suitable new tenant. For example, if it took Larry one month and $75 worth of newspaper ads, he could recover approximately $1,025 (one month's rent + $75) from Tillie, assuming the judge found that Larry had taken reasonable steps to find the new tenant.
The mitigation of damages concept applies to most contracts in which the person damaged has the opportunity to take reasonable steps to limit his or her losses. In the earlier house painting example, if Jeannie Goodday had agreed to pay Homer Brightspot $300 per day for seven days to paint her house and then had canceled after the first day, Homer would be eligible to sue her for the remaining $1,800, based on Jeannie's violation of the contract. However, in court, Homer likely would be asked whether he had earned any other money during the six days. If he had, it would be subtracted from the $1,800. But what if Homer refused other work and slept in his hammock all week? If Jeannie could show that he had turned down other jobs or had refused to make reasonable efforts to seek available work, the judge would likely consider this a failure to mitigate damages and reduce Homer's recovery accordingly.
How much should you sue for if you lent money to a person who promised to repay it but failed to do so? Bring suit for the total you are currently owed, including any unpaid interest (assuming it doesn't result in your claim exceeding the small claims maximum). People sometimes make the mistake of suing for the exact amount of the debt, thinking they could have the judge add the interest when they got to court. This normally can't be done–in most states, the judge doesn't have the power to make an award larger than the amount you request.
Don't invent interest if none was provided as part of the loan. As a general rule, you can only recover interest when it is called for in a written or oral contract. For example, if you loaned a friend $1,000 but never mentioned interest, you can sue only for the return of the $1,000.
Understand special rules for installment loans. If you are owed money under the terms of a promissory note (contract) that calls for repayment to be made in installments, you are normally only entitled to recover the amount of the payments that have already been missed (that is, what you are currently owed) and not those that aren't yet due. And this is true even if you are sure future installments will never be paid. But there is an important exception to this rule: You can sue for the entire loan amount plus any interest your contract calls for if your installment contract contains what lawyers call an acceleration clause–language that states that the entire amount of the loan is immediately due if one payment is missed.
In some situations, a statute (law) establishes your right to receive extra compensation, over and above the amount of the financial loss. The most common of these involves a bad check (or a check on which the writer stops payment in bad faith).
The majority of states have bad check laws, which allow you to recover the amount of the check plus a penalty of two or three times the amount of the check if the person giving it to you does not make it good within the time period allowed by the statute–usually within 30 days of your written demand to do so. In some states, such as California, this law is mandatory–the judge must award the penalty.
In addition, there are usually some minimum and maximum penalties allowed:
- You can usually sue for some minimum amount in damages, no matter how small the bad check. Thus, in California, which has a minimum penalty of $100, if you get a $25 bad check, you can sue for $125.
- There is usually a top limit on the damages you can sue for, no matter how large the check. Thus, in California, where the maximum penalty is $1,500, for a $600 bad check, the most you can sue for is $2,100 (the amount of the check plus the $1,500 maximum).
Don't forget to demand payment before you sue. If someone gives you a bum check or stops payment on a check and you want to try to collect the triple damages, start by sending a letter by certified mail demanding payment of the amount of the bad check, plus any applicable service charge and your mailing costs. Wait at least 30 days before filing suit to give the check writer time to pay.
Further reading. Solve Your Money Troubles: Debt, Credit & Bankruptcy, by Robin Leonard and Margaret Reiter (Nolo), contains the details of every state's bad check law.
Watch your back if you stop payment on a check. If you write a check and then stop payment because you believe the service or goods you purchased were substandard (or never provided), write a letter to the other party stating in detail why you were dissatisfied. If you are later sued in small claims court, bring a copy of your letter to court and show it to the judge as part of your defense.