Table of Contents

Back to OverviewRecovery of Damages for Lost Profits
6th Edition

By Robert L. Dunn

(supplemented September 2017)

Back to Overview  |  Order Now

Volume 1

Volume 2

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Volume 1

Chapter 1:
Legal Principles Governing Recovery

I. PROXIMATE CAUSE

A. The Proximate Cause Rule
B. Proximate Cause — Contract and Tort
C. “But for” Causation as Proximate Cause

1. “But for” Causation Inadequate
2. “But for” Causation Adequate

II. REASONABLE CERTAINTY

A. The Reasonable Certainty Rule
B. Cases Analyzing the Reasonable Certainty Rule
C. Fact and Amount of Damages
D. Uniform Commercial Code

III. FORESEEABILITY

A. The Foreseeability Rule

1. The Two Hadley v. Baxendale Tests
2. Cases Analyzing the Foreseeability Rule

B. The Objective Foreseeability Test

1. Proof of Objective Foreseeability
2. Objective Foreseeability Evidence Rejected

C. The Subjective Foreseeability Test

1. Proof of Subjective Foreseeability
2. Subjective Foreseeability Evidence Rejected
3. Implications of the Subjective Foreseeability Test

D. The Restatement of Contracts Test

E. The Tacit Agreement Test and the Uniform Commercial Code Test

1. Cases Rejecting the Tacit Agreement Test
2. Cases Accepting the Tacit Agreement Test

F. Collateral Transactions

1. In General
2. Lost Profits Damages Not Recoverable
3. Lost Profits Damages Recoverable

G. Foreseeability — Contract and Tort

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Chapter 2:
Recovery in Contract Litigation

I. SALES CASES

A. Buyer’s Lost Profits

1. Uniform Commercial Code
1. Possibility of Cover as a Bar to Lost Profits Recovery
3. Recovery When Goods Unique or Cover Otherwise Impossible
4. Recovery by Reseller
5. Recovery in Other Circumstances
6. Limitation of Consequential Damages under the Uniform Commercial Code

B. Seller’s Lost Profits

1. Uniform Commercial Code
2. Recovery When Goods Cannot Be Resold; Products Manufactured to Specifications
3. Recovery on Requirements Contracts
4. Recovery by Reseller — The Lost-Volume Seller

II. BREACH OF WARRANTY

A. Uniform Commercial Code — Substantive Provisions

1. Express Warranty
2. Implied Warranty
3. Buyer’s Damages

B. Privity of Contract

1. Express Warranty
2. Implied Warranty

C. Foreseeability

1. Express Warranty
2. Implied Warranty
3. Proof of Foreseeability Required

D. Cases Allowing Recovery

III. OTHER CONTRACT CASES

A. Exclusive Agency, Franchise, or Distributorship Contracts

1. In General
2. Computation of Damages
3. Disclaimer Clauses

B. Contracts to Render Personal Services

1. Recovery by Employer
2. Recovery by Employee

C. Construction Contracts

1. Recovery by Contractor — Contract Price Less Cost of Completion
2. Recovery by Subcontractor — Contract Price Less Cost of Completion
3. Recovery by Contractor or Subcontractor — Percentage of Profit on Contract
4. Recovery by Owner
5. Delay Damages
6. Disclaimer Clauses

D. Contracts to Provide Advertising or Marketing

1. Recovery Allowed
2. Recovery Denied
3. Telephone Directory Listing Agreements

E. Leases

1. Recovery Allowed
2. Recovery Denied

F. Covenants Not to Compete

1. Damages Calculated by Plaintiff’s Losses
2. Damages Calculated by Defendant’s Gains

G. Growing Crops; Livestock

1. Damage to Crops
2. Defective Seeds or Plants
3. Defective Livestock or Feed
4. Farm Leases

H. Contracts to Lend Money
I. Insurance Contracts
J. Promissory Estoppel
K. Agreements to Negotiate
L. Winstar Cases

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Chapter 3:
Recovery in Tort Litigation

I. NEGLIGENCE

A. Personal Injury

1. Individual Recovery
2. Corporate Recovery
3. Loss of Specific Contracts

B. Property Damage

1. Commercial Vehicles and Aircraft
2. Other Property

C. The Economic Loss Rule

1. Recovery Denied
2. Recovery Allowed
3. Physical Injury Exception
4. Sudden Accident Exception
5. Special Relationship Exception
6. Services Exception

D. Professional Negligence

II. INTENTIONAL TORTS

A. Interference with Business
B. Unfair Competition

1. In General
2. Misappropriation of Trade Secrets or Customer Lists
3. Damages Calculated by Plaintiff’s Losses or Defendant’s Gains

C. Wrongful Eviction
D. Fraud

1. Benefit-of-the-Bargain Rule
2. Out-of-Pocket-Loss Rule
3. Negligent Misrepresentation
4. Effect of the Uniform Commercial Code
5. Effect of the Restatement of Torts
6. Economic Loss Rule

E. Conversion

1. Recovery Allowed
2. Recovery Denied

F. Interference with Contract

1. In General
2. Damages Calculated by Plaintiff’s Losses or Defendant’s Gains
3. Recovery of Tort Damages in Addition to Contract Damages
4. Texaco, Inc. v. Pennzoil Co.

G. Nuisance; Pollution
H. Trespass
I. Defamation
J. Misuse of Legal Process

III. STRICT LIABILITY IN TORT

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Chapter 4:
Recovery of Lost Profits of an Unestablished Business

I. DEVELOPMENT OF THE MODERN RULE ALLOWING RECOVERY

A. The New-Business Rule

1. Recovery Denied
2. Recovery Allowed

B. The Modern Rule-Damages Recoverable on Proof with Reasonable Certainty
C. The Effects of the Uniform Commercial Code and the Restatement of Contracts

II. WHAT IS AN UNESTABLISHED BUSINESS?

A. Recently Started Business

1. Recovery Allowed
2. Recovery Denied

B. Chain Operations

1. Recovery Allowed
2. Recovery Denied

C. No Prior Successful Experience

1. Recovery Allowed
2. Recovery Denied

D. New Venture as New Business

1. Recovery Allowed
2. Recovery Denied

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Chapter 5:
Standard of Proof and Admissible Evidence

I.    STANDARD OF PROOF

A. Exact Calculation Not Required
B. Punishment of the Wrongdoer
C. The Best Available Proof

1. Recovery Allowed
2. Recovery Denied

D.    Reasonable Basis or Rational Standard

1. Recovery Allowed
2. Recovery Denied

II.    ADMISSIBLE EVIDENCE

A. Plaintiff’s Prior Experience
B. Plaintiff’s Subsequent Experience

1. Recovery Allowed
2. Recovery Denied

C. Plaintiff’s Experience at Other Locations

1. Recovery Allowed
2. Recovery Denied

D. Comparable Experience of Others

1. Recovery Allowed
2. Recovery Denied

E. Defendant’s Subsequent Experience

1. Recovery Allowed
2. Recovery Denied

F. Industry Averages

1. Recovery Allowed
2. Recovery Denied

G. Prelitigation Profit Projections
H. Computation from the Contract

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Chapter 6:
Calculation of Lost Profits Damages

I. NET AND GROSS PROFITS

A. Net Profits
B. Gross Profits

1. Recovery Allowed
2. Vending Machines

C. Burden of Proof of Expenses

II. DEDUCTIBLE COSTS

A. Overhead Overhead

1. Not Deducted
2. Overhead Deducted
3. The Uniform Commercial Code Rule
4. Overhead as Damages

B. Depreciation
C. Tax Benefits and Tax Consequences

1. Tax Benefits Not Deducted
2. Tax Benefits Deducted

D. Proprietor’s Compensation

1. Compensation Deducted
2. Compensation Not Deducted

E. Other Costs
F. Illegal Practices

III. PERIOD OF RECOVERY

A. Long-Term Contracts

1. Recovery Allowed
2. Recovery Denied

B. Contracts Terminable on Notice

1. Recovery for Notice Period Only
2. Recovery beyond Notice Period

C. Contracts Terminable on Reasonable Notice, at Will, or of Indefinite Duration
D. Options
E. Destruction of Business

IV. ELEMENTS OF COMPUTATION

A. Discounting Future Damages

1. Damages Must Be Discounted
2. Determining the Discount Rate

B. Increase or Decrease in Business
C. Impairment of Capital

1. Recovery Allowed
2. Recovery Denied

D. Injury to Goodwill

1. In General: Tax Consequences
2. Recovery Allowed
3. Recovery Denied

E. Internal Revenue Code Subchapter S Corporations

V. MITIGATION OF DAMAGES

A. In General
B. Burden of Proof
C. Offset of Mitigation Profits against Damages

1. Profits Offset
2. Profits Not Offset

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Volume 2

Chapter 7:
How to Prove (And How Not to Prove) Lost Profits Damages

I. PROOF BY EXPERT TESTIMONY

A. Qualification of Expert Witnesses

1. Standards for Qualification of Experts
2. Direct Examination to Establish Expert Qualifications
3. Expert Testimony by Plaintiff
4. Testimony by Outside Experts
5. Impact of Daubert

B. Foundation for Expert Testimony

1. Federal Rules of Evidence Standard
2. Hearsay Statements
3. Business Records
4. Opinions Admitted as Supported by the Evidence
5. Opinions Rejected as Unsupported by the Evidence
6. The Daubert Test

C. The Form of the Expert’s Opinion

1. Percentage and Profit Per Unit Estimates Excluded
2. Percentage and Profit Per Unit Estimates Admitted
3. Lump-Sum Estimates Excluded
4. Causation of Loss
5. Adjustment for Comparability

D. Special Issues for Defense Experts
E. Use of Experts-Case Histories
F. Outline for Direct Examination of a Damages Expert Witness
G. Outline for Cross-Examination of a Damages Expert Witness

II. PROOF BY TABULATIONS, CHARTS, AND GRAPHS

A. Use of Tabulations, Charts, and Graphs
B. Sample Charts

III. DEFENSES TO LOST PROFITS DAMAGES CLAIMS

A. No Opportunity to Realize Profits
B. No Enforceable Contracts or Orders Lost

1. Recovery Denied
2. Recovery Allowed

C. Evidence Too Speculative
D. Double Recovery

IV. PLEADING LOST PROFITS DAMAGES

A. Pleading of Damages Required
B. Pleading of Damages Not Required

V. SAMPLE EXPERT WITNESS REPORTS

A. Sample Written Report on Damages for a Plaintiff in a Federal Court
B. Case Study of Lost Profits Estimation: Grocery Wholesalers
C. Example of a Lost Profits Damage Claim

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Chapter 8:
Illustrative Pleadings and Forms

I. SAMPLE CONTRACT COMPLAINTS

A. Recovery by Buyer under Uniform Commercial Code – Buyer Exclusive Agent
B. Recovery by Seller under Uniform Commercial Code
C. Recovery for Breach of Warranty under Uniform Commercial Code
D. Recovery for Breach of Exclusive Agency Agreement

1. Breach by Manufacturer
2. Breach by Agency

E. Recovery for Breach of Construction Contract and for Negligence
F. Recovery for Breach of Lease

1. Covenant Not to Lease to Competitor
2. Failure to Deliver Possession

II. SAMPLE TORT COMPLAINTS

A. Recovery for Negligent Damage to Commercial Vehicle
B. Recovery for Tortious Interference with Business
C. Recovery for Inducing Breach of Contract

III. INTERROGATORIES

A. Defendant’s Interrogatories
B. Plaintiff’s Interrogatories

IV. JURY INSTRUCTIONS

A. Proximate Cause

1. Plaintiff’s Instruction
2. Defendant’s Instruction
3. Neutral Additional Instruction

B. Reasonable Certainty

1. Plaintiff’s Instruction
2. Defendant’s Instruction
3. Neutral Instruction

C. Foreseeability

1. Plaintiff’s Instruction
2. Defendant’s Instruction
3. Foreseeability of Loss on Collateral Contract
4. Presumptive Foreseeability

D. Unestablished Business

1. Plaintiff’s Instruction
2. Defendant’s Instruction
3. Neutral Instruction – Recovery Allowable

E. Mitigation of Damages

1. Plaintiff’s Instruction
2. Defendant’s Instruction
3. Employment Contract
4. Construction Contract

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Alphabetical Table of Cases

Table of Cases by Jurisdiction

Index