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Law School Case Brief

Kenford Co. v. Cty. of Erie - 67 N.Y.2d 257, 502 N.Y.S.2d 131, 493 N.E.2d 234 (1986)

Rule:

Loss of future profits as damages for breach of contract are permitted in New York under long-established and precise rules of law. First, it must be demonstrated with certainty that such damages are caused by the breach and, second, the alleged loss must be capable of proof with reasonable certainty. In other words, the 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. In addition, there must be a showing that the particular damages are fairly within the contemplation of the parties to the contract at the time it is made. If it is a new business seeking to recover for loss of future profits, a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty.

Facts:

Plaintiff managers brought an action for breach of contract against respondent county arising out of the failure to construct a stadium. The agreement required the county to build a stadium that the managers would have operated for 20 years. The county failed to commence construction and a jury awarded the managers in the ensuing litigation. On appeal, a portion of the judgment for the managers relating to the loss of future profits was reversed. Plaintiffs appealed.

Issue:

Are the plaintiff managers entitled to damages for loss of future profits?

Answer:

No.

Conclusion:

The court held that the manager's proof did not satisfy the requirement that liability for loss of profits was contemplated when the contract was executed or when it was breached because the provision in the contract providing a remedy for the default did not provide liability for loss of profits over the term of the contract. The court also held that the multitude of assumptions required to establish projections of profitability over the life of the contract required speculation and conjecture, making it beyond the capability of even the most sophisticated procedures to satisfy the legal requirements of proof with reasonable certainty.

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