Also known as: profit · profits · profiting · profited · lost profits · net profit
Written by attorneys · grounded in primary & secondary sources — see below
The expected net gain from a completed sale plus an allocation of the seller's fixed costs that would have been incurred regardless of the particular transaction. This measure supplies contract damages when a buyer breaches and the seller is a lost-volume dealer who could have made the sale to another customer.
Boeing held a contract to sell a 747 to Delta. Delta breached. Boeing sold the same plane to another buyer at the same price. Boeing proved it maintained a production line capable of filling both orders and claimed damages measured by the profit including reasonable overhead it would have earned on the Delta sale. The court awarded that amount because Boeing showed it was a lost-volume seller whose fixed costs continued unchanged.
Acme Press held a contract to print catalogs for Apex Stores. Apex breached. Acme Press sold the same print run to another buyer at the same price. Acme Press proved it maintained capacity to fill both orders and claimed damages measured by the profit including reasonable overhead it would have earned on the Apex contract. The court awarded that amount because Acme Press showed it was a lost-volume seller whose fixed costs continued unchanged.
Select any source to read its text and confirm it supports the definition.
Delta Motors held a contract to sell engines to Zeta Trucks. Zeta breached. Delta Motors sold the same engines to another buyer at the same price. Delta Motors proved it maintained a production line capable of filling both orders and claimed damages measured by the profit including reasonable overhead it would have earned on the Zeta sale. The court awarded that amount because Delta Motors showed it was a lost-volume seller whose fixed costs continued unchanged.
Titan Equipment held a contract to sell tractors to Green Farms. Green Farms breached. Titan Equipment sold the same tractors to another buyer at the same price. Titan Equipment proved it maintained inventory capable of filling both orders and claimed damages measured by the profit including reasonable overhead it would have earned on the Green Farms sale. The court awarded that amount because Titan Equipment showed it was a lost-volume seller whose fixed costs continued unchanged.
Summit Furniture held a contract to sell desks to Metro Offices. Metro Offices breached. Summit Furniture sold the same desks to another buyer at the same price. Summit Furniture proved it maintained production capacity to fill both orders and claimed damages measured by the profit including reasonable overhead it would have earned on the Metro Offices sale. The court awarded that amount because Summit Furniture showed it was a lost-volume seller whose fixed costs continued unchanged.
Pacific Distributors held a contract to sell appliances to Valley Retail. Valley Retail breached. Pacific Distributors sold the same appliances to another buyer at the same price. Pacific Distributors proved it maintained warehouse capacity to fill both orders and claimed damages measured by the profit including reasonable overhead it would have earned on the Valley Retail sale. The court awarded that amount because Pacific Distributors showed it was a lost-volume seller whose fixed costs continued unchanged.
The formula applies when the market-price measure in 2-708(1) is inadequate to place the seller in as good a position as performance would have done. This occurs with lost-volume sellers who maintain sufficient capacity to sell to both the breaching buyer and a replacement buyer.
Supporting sources
Yes. The statute expressly adds reasonable overhead to the profit figure. Fixed costs that the seller would have incurred even without the breached contract are therefore included in the damages award.
Supporting sources
The seller must show it had the capacity and intent to sell the same goods to another buyer at the same time. Once that showing is made, the seller need not prove the second sale actually occurred.
Supporting sources
…some other customers, and they lost the means and opportunity of selling flour, sharps, and bran and were deprived of gains and profits which otherwise would have accrued, and were unable to employ their workmen, to whom they were compelled to pay wages during that period; they thus suffered damages to the amount claimed of…