Lost profits are determined by first estimating the lost gross revenue or lost sales due to an event.  This lost revenue is then reduced by the avoided or saved costs, which entails evaluating all the direct and other costs related to providing goods or services. 

The party seeking an award of lost profits must show that: (1) the parties contemplated the possibility of lost profit damages or that the lost profit damages were a foreseeable consequence of the conduct; and (2) that the lost profit damages are capable of proof with reasonable certainty.

A claim for lost profits argues that, due to the action or inaction of some other party, profits were lost and should be recovered by the party who lost them.  Disputes as to what constitutes recoverable lost profits are common in construction cases because construction business profit often involves factors outside of the business’ control.  In this industry it can be easy for one construction business to cause another to lose profits. The question of whether lost profits resulting from a contract breach constitutes direct or consequential damages has vexed practitioners for decades.  The primary factor is foreseeability of the eventual outcome at the time of contracting. Lost profits are often the single largest component of a plaintiff’s claim for breach of contract damages, and many contracts exclude recovery of consequential damages in the event of breach.  So significant sums may hang in the balance. Often a case will boil down to the question: are the subject damages direct or consequential?

Do not hesitate to contact the attorneys at Tishkoff if you have questions regarding litigation, or business or employment law.  Contact information for the Tishkoff attorneys is available at Tishkoff’s web site:  https://tishold.dream.press/.  

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Sources: https://www.bvresources.com/blogs/bvwire-news/2018/08/27/do-you-know-the-common-elements-of-lost-profits-damages-cases

Claims for Lost Profits Are Difficult to Prove | Construction Claims