Page 30 - Calculating Lost Profits

newal terms), depending on the circumstances. The loss period’s determination may be further compli-
cated if the length of the contract is one of the issues in dispute. Disputes regarding the loss period in a
breach of contract matter may include the following considerations and factors:

 Length of the contract. Some contracts may explicitly provide the start and end dates of a con-
tract, whereas others leave these dates unspecified. Even if a start and end date are provided, this
may not be indicative of the loss period. Additionally, although the circumstances of each matter
vary, some courts have been reluctant to award damages for the full length of the loss period
(that is, the full term of the contract) because of uncertainty.

 Renewal history. If the parties have had a history of renewals or there is evidence indicating a re-
newal may occur (such as an extension provision in the contract, testimony, or the parties’ corre-
spondence), a loss period that considers contract renewals may be warranted.

 Contract renegotiations. Although damages typically do not extend beyond the term of the con-
tract (that is, because a defendant could choose to not renew the contract), an issue could con-
ceivably arise if an extension of the contract term was being negotiated when the breach oc-
curred. Arguably, had the breach not occurred, it may be possible that the contract would have
been extended for some additional term. Alternatively, if a contract renewal right was controlled
only by the plaintiff, assumption of an extension may be appropriate.

 Notice-of-termination provisions. Depending on the facts and circumstances of a case, the court
may, in some situations, not extend damages beyond the length of time provided for under the
notice-of-termination provisions. For example, if a supplier ceased supplying a customer with a
product without notice, but the supply contract required a 90-day notice, then in the but-for
world it may be reasonable to expect that the supplier would cease supplying the product after
the 90-day notice period elapsed. As a result, the damage period may go from the date on which
the supplier actually ceased supplying to a date 90 days later. However, damages may extend be-
yond the 90 days if the customer would have purchased the product under contract in the 90-day
period, but the customer would have used the supplied product, in a product sold to consumers or
others later in time.

 Other factors. This may include confounding events, unrelated to the facts and circumstances of
the case, such as issues in the plaintiff’s industry that would have injured the business had the
contract been performed.

Using the American Kitchen example, the franchise agreement provided for a 10-year term with the pos-
sibility of a 5-year renewal. The 11th location, associated with the wrongful act of not approving the de-
velopment plan, was planned to open in 2017. Given these facts, the loss period could possibly begin in
2017, when the new location was projected to open per the development plan. The practitioner, howev-
er, may want to consider the length of time that was required to open the 10 original locations. If the
timeline of the 11th location did not align with historical timelines of the original 10 locations, the prac-
titioner may want to investigate to determine if the loss period start date used in the development plan is
appropriate. In addition, it would likely be appropriate to consider costs to open the 11th location, in-
cluding costs that would have been incurred prior to the 11th location’s projected opening date.

Possible options for the end date of the loss period include the following:

 The projected actual opening date of the 11th location, assuming that the court ruled in favor of
Franchisee, and Franchisee can later open at the same location

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