Seller breached contract terms and is trying to void the contract in their favor. They have voided contracts illegally in the past and no one has pursued them in court. The seller's intent is to pocket the money paid thus far, and start another identical one in hopes of ongoing income for one item. Contract falls under Civil Code, not UCC.
Can I sue in small claims court for the money paid?
Yes you can sue. Whether or not you have a case is not clear from your facts. You appear to have a confusing and complicated situation. Your best bet is to retain an attorney, but if there is not enough money involved, small claims court is an option.
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You should strongly consider sitting down with an attorney and discussing the facts surrounding your situation. An attorney who handles contract disputes should be able to help you determine whether there is recourse. It sounds like your situation may have some complicated facts that need to be parsed out more methodically.
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