Contract Law: Certainty
Certainty – damages may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes. Wakeman v. Wheeler & Wilson Mfg. Co., 101 N.Y. 205. “Where it impossible to marshal any evidence which would support a finding of exact figures, abandoned that claim. Any attempt to reach a precise sum [cannot] be mere blind guesswork. ” Security Store & Mfg. Co. v. American R. E. Co., 227 Mo. App. 175 1932
The requirement that damages must be reasonably certain does not require absolute certainty. Damages resulting from the loss of future profits are most often an approximation. The law does not require that they be determined with mathematical precision. It requires only that the damages by capable of measurement based upon known reliable factors without undue speculation. Ashland Management Inc. v. Janien, 82 N.Y.2d 395 (1993).
Lost profits for a new venture may be awarded if plaintiff establishes three elements set forth in Perma Research & Devel Co. v. Singer Co., 402 F.Supp. 881:
- That the lost profits are the direct and proximate result of the breach
- That the profits were contemplated by the parties
- That there is a rational basis on which to calculate the lost profits
Case examples:
- Kenford v. Erie County – damages were not awarded for brand new ventures of a conjectural nature (proposed football stadium)
- Ashland Management v. Janien – damages were awarded for breach of an employment contract at a hedge fund based on performance
- Rombola v. Cosindas – damages awarded for the future performance of a race horse
- Contemporary Mission, Inc. v. Famous Music Corp. – damages awarded for loss of royalties of record sales
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