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Posted: January 20, 2016

Lost Profits Damages Awarded On Contract Claim Because They Were Contemplated by the Parties

On January 13, 2016, the Second Department issued a decision in Inspectronic Corp. v. Gottlieb Skanska, Inc., 2016 NY Slip Op. 00155, affirming an award of lost profits on a breach of contract claim, explaining:

A party may not recover damages for lost profits unless they were within the contemplation of the parties at the time the contract was entered into and are capable of measurement with reasonable certainty. The rule that damages must be within the contemplation of the parties is a rule of foreseeability. The party breaching the contract is liable for those risks foreseen or which should have been foreseen at the time the contract was made. For damages to be reasonably certain, does not require absolute certainty. Damages resulting from the loss of future profits are often an approximation. The law does not require that they be determined with mathematical precision. It requires only that damages be capable of measurement based upon known reliable factors without undue speculation.

Here, contrary to the defendant’s contention, the evidence established that, at the time the parties entered into the subcontract, they anticipated that there would be dive-related change orders, and that all such change order work would be performed by the plaintiff. The evidence thus established that damages for the loss of such profits were within the contemplation of the parties at the time the contract was entered into, and were a risk foreseen or which should have been foreseen at the time the subcontract was made. As to the requirement that damages for future lost profits be capable of measurement based upon known reliable factors without undue speculation, the undisputed evidence of the actual amount paid to the plaintiff’s successor for change order work provided an exact number for the loss of those profits, without the need for any speculation.

As to the claim for lost profits in connection with completion of the four remaining base work items, the general measure of damages in an action for breach of a fixed-price construction contract, where full performance of the contract is prevented by the owner, is the contract price, less payments made and less the cost of completion. Here, as the parties agree as to the contract price for the remaining base work items, the sole variable is the calculation of the costs to be subtracted from the contract price. Contrary to the defendant’s contention, the projected lost profits and costs submitted by the plaintiff were sufficiently supported by the evidence to establish the plaintiff’s entitlement to damages in connection with the four base work items. While there is no merit to the defendant’s arguments regarding the general reliability of the projections, we agree that the Supreme Court erred in failing to account for the cost of materials that would have been incurred had the plaintiff completed the job. As the testimony of the plaintiff’s owner established that the fuel necessary to transport people and equipment would have cost him approximately a half of a percent of the price of the job, that amount should have been subtracted from the damages for lost profits award.

(Internal quotations and citations omitted) (emphasis added).

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