Recovering or Defending Claims for Business Lost Profits in Commercial Disputes
This article appeared in the "Consult the Counsel" special advertising section in the Orlando Business Journal on April 27, 2018.
Whether seeking lost profits or defending a claim for lost profits, several issues need to be considered: Lost profits must be established with reasonable certainty as to cause and amount, be a natural consequence of the wrong, and cannot be based upon speculation or conjecture.
For a breach of contract, such damages must be reasonably contemplated at the time of contracting. Typically, lost profits are proven by: (1) comparing profits before the harm to estimate profits had the harm not occurred; or (2) when a business lacks an established earnings record, the “yardstick” approach. Here, a party must show the profits of a comparably similar business as a measure of projected profits that would have been earned but for the harm. Any calculation of lost profits must also account for and deduct all direct costs and any indirect costs that are avoided as a result of the wrongful conduct. Additionally, a party seeking to recover lost profits may have a duty to mitigate some or all of the loss.