Thursday, February 4, 2016

Contract Damages: Lost Profits

If someone breached our contract, can I seek recovery of lost profits?

Generally, Texas law does allow a party injured by another party’s breach of their contract to sue for lost profits. “Generally, the measure of damages for breach of a contract is that which restores the injured party to the economic position he would have enjoyed if the contract had been performed. This measure may include reasonably certain lost profits. Lost profits may be in the form of direct damages – that is, profits lost on the contract itself – or in the form of consequential damages – such as profits lost on other contracts resulting from the breach. To be recoverable, consequential damages must be foreseeable and directly traceable to the wrongful act and result from it. Thus, consequential damages are generally not recoverable unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach.” See AZZ Inc. v. Morgan, 462 S.W.3d 284, 289 (Tex. App. – Fort Worth 2015, no pet.) (citations omitted).