Loss of future or anticipated profit -- that is, loss of expected monetary gain -- is recoverable in a breach of contract action: 1) if the loss is within the contemplation of the parties at the time the contract was made, 2) if the loss flows directly or proximately from the breach -- that is, if the loss can be said to have been caused by the breach -- and 3) if the loss is capable of reasonably accurate measurement or estimate. An award in the form of a loss of profits, in fact, is generally considered a common measure of damages for breach of contract, it frequently represents fulfillment of the non-breaching party's expectation interest, and it often closely approximates the goal of placing the innocent party in the same position as if the contract had been fully performed.
The floral wire service entered into a two-year contract with a floral products marketer to process consumer orders. Two weeks later, the floral wire service entered into a contract with the provider for telecommunication services. The provider failed to perform its duties under its agreement, and the floral wire service brought an action for breach of contract. The jury awarded damages to the wire service, including lost profits that would have been earned under the contract with the marketer. The appellate court affirmed in part and remanded, holding that the award for lost profits should be limited to a 60-day period in light of a termination notice clause in the collateral contract.
Is the wire service entitled to lost profits because of the provider’s contractual breach?
The court affirmed in part and reversed in part. The court held that lost profits under the collateral contract could be recovered because the contractual relationship between the wire service and the marketer was within the contemplation of the provider when it agreed to provide telecommunication services. The court held that the notice clause did not preclude recovery beyond the 60-day period because the provider had no right to terminate the contract with the marketer.