Being Sued For Breach Of Contract

[tacobellcup]

Received a summons for small claims ct. for breach of contract. Issue involves a personal loan from a friend. The amount is $7500 and the agreement was oral - nothing in writing. I have made monthly payments for the past 8 months, in varying amounts. Now the loaner wants to sue, he contends I breached by not sticking to the original amount of the agreement which was $$200 per month. He has accepted every check I've sent, no matter what the amount has been. The amounts have varied from $125-200.
Does he have a case and how would a judge rule? Would I have to pay the balance in full if I'm found in breach? Thanks- Georgia

[Betty3]

If you owe the money, most likely the judge will rule against you - that you need to pay the balance due. It will have to be decided if the full bal. amt. needs to be paid or if you can continue on a payment plan. Your friend will probably want the whole balance due.

[BOR]

Received a summons for small claims ct. for breach of contract. Issue involves a personal loan from a friend. The amount is $7500 and the agreement was oral - nothing in writing. I have made monthly payments for the past 8 months, in varying amounts. Now the loaner wants to sue, he contends I breached by not sticking to the original amount of the agreement which was $$200 per month. He has accepted every check I've sent, no matter what the amount has been. The amounts have varied from $125-200.
Does he have a case and how would a judge rule? Would I have to pay the balance in full if I'm found in breach? Thanks- Georgia

He probably has a case, yes. You can argue though, even if a material breach occurred by paying a smaller amount, it constituted a "waiver" to the orginal terms and he can not enforce them now?? If 1 or 2 payments were accepted at the lower amount and then he demanded the original amount, it may be a stronger argument for him, but since 8 were made, it would seem to indicate "some" degree of a waiver, at least in my opinion??

The argument may or may not have judicial/precedential merit.

You can only be ordered to pay the full amount IF this was the terms of your original agreement. That is, if you do not fullfill your end of the contract, then the whole amount is due and payable on demand? Was this the agreement?? A contract of such a large loan amount not in writing is not good for him to argue the exact terms of?

You do acknowledge the debt, so the court then must decide, IF indeed there was a material breach.

Oh, I might add to this, IF you are found in material breach, IMO, the Judge/Magistrate will only order the 220/mth to be paid again, and then if you are delinquent afterwards, the court may retain jurisdiction and then order a garnishment of wages??

Could be also the court will order both sides to execute an agreement in open court if the case is decided in your favor, so there is no doubt what the terms are for the remainder of the contract!

Contact the Plaintiff and ask if this can be worked out before any court appearance.

[tacobellcup]

there was no agreement as to payment amounts prior to the actual issue of the money. The money was issued and we discussed the payment amount later. After that, we agreed to begin with payments at $200. This was based on our household budget- we shared expenses. A month after that he kicked me out and I had to move. I kept paying monthly but lowered the payments at that time due to the fact that my living expenses doubled when I had to find a new place. He accepted the checks and never said anything about going back to the original amount. Then, 3 months later he contacted me asking me to pay the original amount again. I said I would try but could not gurantee I could keep it up indefinitely. I paid two more paymenst of $200 but then contacted him asking to lower the payments again- it was just too much for my budget. He became angry and wanted me to sign a contract. I said I would consider a contract. We both agreed at that time to set the payments permanently at one-half of the original amount. I paid two more months at $100. He hired an attorney who demanded I sign their contract or else the agreement was off. I told the attorney we agreed on $100 before he hired him - so the amount has been set. As for the contract, I never signed becasue they refused to draw up one that contained reasonable terms. Their contract had usury-level late fees, collection contingencies, attorneys fees, and a clause that said they could call the loan at any time for any reason and they would not even have to notify me. While I was agreeable to sign a contract even though I legally didn't have to - I knew a contract would also protect me. I told them this. I sent them a revised contract whioch excluded late fees, and that clause and I never heard back from them until I received the summons.

[BOR]

there was no agreement as to payment amounts prior to the actual issue of the money. The money was issued and we discussed the payment amount later. After that, we agreed to begin with payments at $200. This was based on our household budget- we shared expenses. A month after that he kicked me out and I had to move. I kept paying monthly but lowered the payments at that time due to the fact that my living expenses doubled when I had to find a new place. He accepted the checks and never said anything about going back to the original amount.

These additional details help some with an analysis.


This is based on contract law, whether the agreement was in writing or oral. There are certain doctrines that may excuse your obligation of the original 200/mth payment due to unforseen circumstances.

One is called Frustration of purpose.

The Restatement of Contracts, Second § 265 defines frustration of purpose:

“ Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his remaining duties to render performance are discharged, unless the language or circumstances [of the contract] indicate the contrary.


http://en.wikipedia.org/wiki/Frustration_of_purpose

Your contract was made due to specific financial considerations, and it was agreed to due to them, hence a "meeting of the minds" took place.

These relied on conditions became "frustrated" when you were asked to leave.

To try to help with a defense you can research some contract case law yourself. Pay a visit to a University/College school of law law library, they are open to the public. Ask where you can find the Restatement of the Law legal volumes. Once you locate them, find the volume for contracts, 2nd edition,as quoted above. Courts many times cite the Restatement in thier decisions.

Your state also has volumes of case law on different topics, including Contracts, ask a library clerk/attendant where you can find these volumes, "TRY to cite jurisdictional case law if you can", your state, your appeals court district, etc., although the Restatment is well respected, but not necessarily binding unless your state has similar decisional law = to that.

Bear in mind, I am NOT an attorney, so any case law/doctrines I quote are simply some contract law that can "possibly" be argued and may or may not apply. Once you do your research, you can present any defense in court you deem relevant, whether it is the frustration doctrine or not. YOU, and no one else, need to decide on your legal presentation, unless of course you consult an attorney licensed in your state.

If you can, once a defense will be argued, type up a statement/declaration of your argument, make about 4 or 5 copies, one for you, the plaintiff and one for the court. When in court submit one to each with the court's permission. If typing is not possible, PRINT as "neatly as you can", and sign the statement. The court needs the original if they are photocopied.

I just don't know how a court will rule, but based on the facts you presented, I can't see the court ordering either the FULL amount due and payable OR the 220/mth?

Even if I were a skilled attorney arguing in your defense, there is no guarantee the court will follow my law as quoted. Some states do NOT permit attorneys in small claims court either. I don't know about your state.

Oh, photocopy any case law citations at the law library so you can take them home and prepare a defense.

I think the judge/magistrate/referee will rule you only have to continue with the payments you were making, not the 200.

Be polite and professional, address the court as "your honor" when you can, be courteous to the plaintiff also.

Dress nicely also (nothing personal). Court demeanor and appearance are very important.

Good luck,

BOR

[tacobellcup]

Thank you- great advice and I actualy found the Frustration of Purpose defense listed in Wikipedia, which is a good resource for legal terms, etc.

Yes, the original loan payment was based on a very defined set of circumstances. Once those changed significantly, due to actions initiated by the loaner, I was unable to pay the full amount - not unwilling, as I've never seen it my place to not pay the loan.

I also wondered about the statute of frauds defense: we set the original terms for payments to execute over a period exceeding one year. The loan could not be paid in a year or less unless I got an unforeseen windfall. of cash. Im not sure how the one year execution aspect of SOF works though...

Another angle might be "unconscionability". The loaner expects the payments to remain the same although he initiated circumstances that directly affected my ability to pay. I suppose I could have moved out and found another place for $400 a month but highly unlikely in the Atlanta area as rents average 700-800.

Estoppel by Acquiescence: Duty perform changes when party agrees to a waivering or change. In this case, the loaner accepted multiple payments for less than the original amount and therefore acquiesced to the lower amounts.

Pertaining to the "breach" itself:
The breach is not "fundamental" in that it (lowering of payments) is not serious enough to constitute a full terminatin of the contract. At worst, the judge might rule to "cure" the claimed "ill" and order me to ay the difference/offset caused by the months I paid less than $200.


I've learned way more than I ever wanted to know about law in researching this and I can say I will not attempt to rep myself in court. I may have a layman's understanding of what is happening but there's no way I could effectively or convincingly present those arguments in court.

we'll see what happens...

[BOR]

we'll see what happens...

Post back when you get a decision, if you want to that is.


Good luck in your worldy life also.

BOR