Which of the following includes lost profits so long as those damages are not too speculative?
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Journal Information Franchise Law Journal is published quarterly, by season, by the American Bar Association Forum on Franchising. The Franchise Law Journal seeks to inform and educate members of the bar by publishing articles, columns, and reviews concerning legal developments relevant to franchising as a method of distributing products and services. Publisher Information With nearly 400,000 members, the ABA provides law school accreditation, continuing legal education, information about the law, programs to assist lawyers and judges in their work, and initiatives to improve the legal system for the public. Rights & Usage This item is part of a JSTOR
Collection. Cox, J., Expropriation in Investment Treaty Arbitration, Oxford University Press, 2019, Chapter 13, paras. 13.82, et seq. Kantor, M., Valuation for Arbitration: Compensation Standards, Valuation Methods and Expert Evidence, Kluwer Law International, 2008, Chapter 2, Section VIII. Marboe, I., Calculation of Compensation and Damages in International Investment Law, Oxford University Press, 2017, Chapter 3. Ripinsky, S. and Williams, K., Damages in International Investment Law, British Institute of International Comparative Law, 2008, Chapter 4, section 4.3.4 and Chapter 7. Sabahi, B., Compensation and Restitution in Investor-State Arbitration: Principles and Practice, Oxford University Press, 2011. Definitions Consequential damages, in contrast, “are secondary or derivative losses arising from circumstances that are particular to the contract or to the parties.” Lewis Jorge, 34 Cal. 4th at 968. These damages “will not be presumed by mere breach.” Id. at 969. Rather, such damages are only recoverable when “the special or particular circumstances from which they arise were actually communicated to or known by the breaching party (a subjective test) or were matters of which the breaching party should have been aware at the time of contracting (an objective test).” See id. at 968–969. However, “the nature of the contract or the circumstances in which it is made may compel the inference that the defendant should have contemplated the fact that such a loss would be the probable result of the defendant's breach.” Lewis Jorge, 34 Cal. 4th at 970. Lost
Profits In California, lost profits may be considered direct damages when the profits are “part and parcel of the contract itself.” Lewis Jorge, 34 Cal. 4th at 971. The California Supreme Court has explained that lost profits from collateral agreements often constitute direct damages in cases involving crops, goods intended for resale, or an agreement creating an exclusive sales relationship. Id. at 971–72. In those cases, the “likelihood of lost profits from related or derivative transactions is so obvious . . . that the breaching party must be deemed to have contemplated them at the inception of the contract.” Id. More commonly, though, lost profits are considered to be consequential rather than direct damages. Lewis Jorge, 34 Cal. 4th at 975 (citing 3 Dobbs, Law of Remedies (2d ed. 1993) § 12.4(3), pp. 76-77). And consequential damages can include profits expected from collateral agreements with third parties. See Hydraform Products Corp. v. Am. Steel & Aluminum Corp., 127 N.H. 187, 199–200, 498 A.2d 339, 346-47 (New. Hamp. 1985) (“As a general rule, loss in the value of a business as a going concern, or loss in the value of its good will, may be recovered as an element of consequential damages.”); CR-RSC Tower I, LLC v. RSC Tower I, LLC, 429 Md. 387, 407-08, 56 A.3d 170, 182 (2012) (noting that damages are consequential “when lost profits are claimed for lost income from business operations that would have been made but for the breach”); Airlink Commc'ns, Inc. v. Owl Wireless, LLC, No. 3:10 CV 2296, 2011 WL 4376123, at *3 (N.D. Ohio Sept. 20, 2011) (concluding that lost profits are consequential when they are “contingent upon third-party agreements” not directly tied to the contract that has been breached); cf. DaimlerChrysler Motors Co., LLC v. Manuel, 362 S.W.3d 160, 185 (Tex. App. 2012) (“And it bears repeating that lost profits are not per se consequential damages solely because there will be a subsequent sale to third parties.”). Proving Lost Profits Also, and the core question on recoverability, lost profits damages must be proven with “reasonable certainty.” Sargon Enterprises, Inc. v. Univ. of S. Cal., 55 Cal. 4th 747, 775 (2012). Future profits cannot be recovered where they depend on future contracts that are “uncertain or speculative.” Food Safety Net Servs. v. Eco Safe Sys. USA, Inc., 209 Cal. App. 4th 1118, 1132 (2012) (“[L]ost anticipated profits cannot be recovered if it is uncertain whether any profit would have been derived at all from the proposed undertaking”). Generally, damages for future profits of an unestablished business are not recoverable because such profits are “uncertain, contingent and speculative.” Sargon, 55 Cal. 4th at 775; Shade Foods, Inc. v. Innovative Products Sales & Mktg., Inc., 78 Cal. App. 4th 847, 890 (2000), as modified on denial of reh'g (Mar. 29, 2000) (noting that for new businesses, the “absence of income and expense experience renders anticipated profits too speculative to meet the legal standard of reasonable certainty”). Takeaways
When it comes time to proving up lost profits damages, the following should be considered:
Keywords: litigation, business torts, lost profits, direct damages, consequential damages Which of the following is true regarding whether usage of trade may impose a remedy in the event of a breach?Which of the following is true regarding whether usage of trade may impose a remedy in the event of a breach? Usage of trade may impose an exclusive remedy in the event of a breach.
Is loss of profit general damages?There are two types of damages recoverable as lost profits: (1) lost profits that are general damages; and (2) lost profits that are consequential or special damages.
What are the damages that can be claimed in case of breach?There are many types of damages for breach of contract that you may receive should a breach occur.. Compensatory Damages.. Liquidation Damages.. Punitive Damages.. Nominal Damages.. Ordinary or General Damages.. Equitable Remedies.. Are lost profits consequential damages in California?More commonly, though, lost profits are considered to be consequential rather than direct damages. Lewis Jorge, 34 Cal.
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