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  4.  | What evidence do I need to file a lawsuit for lost profits?

What evidence do I need to file a lawsuit for lost profits?

| Apr 25, 2020 | Business Law

Entering into a contract or a lease with a company generally signifies that you anticipate generating revenue through the agreement. If the other party cannot fulfill its terms, however, you may file a lawsuit alleging lost profits.

A Florida court may require proof that the other party caused your business to lose income. Financial harm must have occurred because of a breach of duty or wrongful conduct by the party you wish to sue.

A judge, however, may require you to show with reasonable certainty that the other party’s action or inaction resulted in your loss of sales revenue.

How do I calculate a business loss?

Accountants and financial analysts often create projections or a pro forma statement to demonstrate how much income a business should have earned. A calculation of anticipated profits, however, may not always prove that the other party’s action caused a shortfall.

Evidence such as receipts for inventory purchases or remodeling a retail storefront may help demonstrate a business loss. These records show you made an investment into your company’s future with a reasonable reliance on the other party coming through on the terms of the contract.

As explained by the American Bar Association’s Business Law Section, proving how much you incurred in lost sales can determine the extent of damages. The analysis typically requires calculating how many units of a product you would have sold, the sale price and the time spent on your shelves.

Does a contract need to include a foreseeable event clause?

When the possibility exists that a contract may need rescinding to avoid causing catastrophic harm, a clause may note the damages that could result from a foreseeable event. Some agreements may outline terms, conditions or events that would allow a party to rescind or void a contract.

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