On this blog site, we have written about the difficulties that Georgia law creates for employers who want to recover punitive damages related to their breach of contract claims. Today we will briefly discuss another area that seriously affects the economic viability of both large and small businesses: recovering lost (anticipated) profits due to another party breaching your contractual agreement. Understandably, recovering lost profits may seem straightforward to you, but Georgia courts don’t see it that way. As we have said before, In Georgia, you need a good lawyer to navigate the tricky issues pertaining to breach-of-contract claims, including the difficulties associated with recovering lost profits, which you may be legally entitled to.
Here’s the problem: The Georgia Court of Appeals feels that “ordinarily, anticipated profits are too speculative to be recovered.” However, the term ordinarily, used by the Court, does not mean anticipated profits are never recoverable. There are circumstances that may allow you to recover anticipated (lost) profits when a person breaches a contractual agreement made with you.
Ask yourself the following questions, because if you call us based on this entry and/or others, we are going to definitely ask you the following questions, and many more:
1. Is your business established? That is, how long have you been around? Typically, new businesses have a much harder time recovering lost profits because many do not have “definite, certain, and reasonable” data to support their claim for lost profits. That means, to Georgia courts, your profits lean more towards being speculative than certain, so recovery may be more difficult.
Ask yourself: if my business has been around for only one year, or two, can I really claim that, had the other party not breached our contract, my profits were almost certain? If the answer is yes, then a few counters would be: how do you know? where is the consistent data? Aren’t the first 0-5 years extremely volatile, profit-wise, for businesses? Evidently, young businesses have it tough in this area of recovery.
2. Even if you own an established business and have definite, certain, and reasonable data to demonstrate lost (anticipated) profits, Georgia courts (and we) still want to know: At the time you and the other party entered into the contract, which was eventually breached, did the breaching party understand that breaking the contract would produce negative economic consequences for your business? Again, due to the confusing nature of this issue, focus on what was understood at the time you entered into the contract.
For example, you may have had a significant event that was dependent on your contractual agreement being executed in a “time-of-the-essence” manner. Did the breaching party know that? Did you make that known in the contract? Or, was it an oral agreement, which would involve entirely different legal issues regarding proof of the understanding.
Notably, the two above-mentioned issues do not have to be proven with mathematical certainty. But your lawyer must:
1. Show the probable gain [profits], with great specificity;
2. Show the expenses incurred in realizing such profits, with great specificity; and 3. Demonstrate that the lost (anticipated) profits incurred are directly related to the acts of the party who breached the contract.
As you can read, the situation is complex, and the above-mentioned are just a few of the issues and questions that must be properly analyzed.
Simply put, contract disputes are difficult. Find a good lawyer who understands how to maximize your total recovery.
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