Legal Definitions - lost profits

Definition: Lost profits refer to the amount of money that a seller would have earned if a buyer had not breached a contract. It is a measure of damages that allows the seller to collect the profits that would have been made on the sale.

Example: Let's say that a company enters into a contract to sell 100 units of a product to another company for $10,000. However, the buyer breaches the contract and fails to purchase the products. The seller can claim lost profits, which would be the amount of money they would have earned if the sale had gone through. In this case, the lost profits would be $10,000.

Another example: A restaurant owner enters into a contract with a catering company to provide food for a large event. The catering company cancels the contract at the last minute, causing the restaurant owner to lose out on potential profits from the event. The lost profits in this case would be the amount of money the restaurant owner would have earned from catering the event.

The examples illustrate how lost profits are calculated and why they are important in contract law. They allow the injured party to recover the amount of money they would have earned if the contract had been fulfilled.