Lost Profits in Business Contracts
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Noble fir Farm, Inc.
Student Coaching Notes
2
Recovery of Lost Profits
Is the Lost Profits Limitation Clause Part of the
Contract?
May an Established Business Recover Lost
Profits Based on Projection of Future Income?
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Is the Lost Profits Limitation
Clause Part of the Contract?
Is there an Acceptance?
- Definite
- Timely
- Not Conditional
on Offeror’s Assent
Are the Additional/Different
Terms Part of Contract?
Rejection & Counter Offer
Both Parties Merchants
At Least One Party is Not a Merchant
No
, unless Offeror Expressly Consents
Yes
, unless
- Material Alteration
- Offer Limit Acceptance
- Offeror Objects
4
Material Alteration
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Clauses that deny implied warranties
Clauses that require arbitration
Clauses that limit remedies
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Not Speculative in Nature
No Absolute Precision is Required
May Rely on Statistical Models based
on Past Financial Data
6
Question 2a:
Getting the Histogram
Use Excel to Calculate Profits on Spreadsheet
File
Harvey’s Case
.
Divide Profits Range (Highest Minus Lowest) by
6 to Get Bin Size and Round to Nearest 1000’s.
Manually Input 6 Upper Values of Bins into
Column of Spreadsheet File
Harvey’s Case
.
Follow Directions for Constructing Histograms on
Using_Excel_for_Stat
PowerPoint.
7
Questions 2b & 2c:
Descriptive Statistics
Follow Directions for Descriptive Statistics
on
Using_Excel_for_Stat
PowerPoint.
Use a
99%
Confidence Level when Using
Excel.
8
Question 2 d:
Expected Exposure
Expected Exposure = Construction Costs +
Total Expected Profits for Six Months
Basis for Compensation
9
Question 4:
Hypothesis Test
Test Mr. James’s Claim that Offer
Underestimated Lost Profits (Profit
Increased During Last Six Months).
Follow Directions for Hypothesis Testing
on
Using_Excel_for_Stat
PowerPoint.
Use
Two
Sample Assuming Equal
Variances
.
Exploring key concepts related to lost profits in business contracts, including limitations clauses, acceptance criteria, material alterations, and the projection of future income. The instructions for calculating profits, descriptive statistics, and expected exposure in a business context are also covered.
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Presentation Transcript
Noble fir Farm, Inc. Student Coaching Notes 1
Recovery of Lost Profits Is the Lost Profits Limitation Clause Part of the Contract? May an Established Business Recover Lost Profits Based on Projection of Future Income? 2
Is the Lost Profits Limitation Clause Part of the Contract? Is there an Acceptance? - Definite - Timely - Not Conditional on Offeror s Assent Rejection & Counter Offer Are the Additional/Different Terms Part of Contract? Both Parties Merchants At Least One Party is Not a Merchant Yes, unless - Material Alteration - Offer Limit Acceptance - Offeror Objects No, unless Offeror Expressly Consents 3
Material Alteration Surprise or Hardship Standard Clauses that deny implied warranties Clauses that require arbitration Clauses that limit remedies 4
May an Established Business Recover Lost Profits Based on Projection of Future Income? Reasonable Certainty Standard Not Speculative in Nature No Absolute Precision is Required May Rely on Statistical Models based on Past Financial Data 5
Question 2a: Getting the Histogram Use Excel to Calculate Profits on Spreadsheet File Harvey s Case. Divide Profits Range (Highest Minus Lowest) by 6 to Get Bin Size and Round to Nearest 1000 s. Manually Input 6 Upper Values of Bins into Column of Spreadsheet File Harvey s Case. Follow Directions for Constructing Histograms on Using_Excel_for_Stat PowerPoint. 6
Questions 2b & 2c: Descriptive Statistics Follow Directions for Descriptive Statistics on Using_Excel_for_Stat PowerPoint. Use a 99% Confidence Level when Using Excel. 7
Question 2 d: Expected Exposure Expected Exposure = Construction Costs + Total Expected Profits for Six Months Basis for Compensation 8
Question 4: Hypothesis Test Test Mr. James s Claim that Offer Underestimated Lost Profits (Profit Increased During Last Six Months). Follow Directions for Hypothesis Testing on Using_Excel_for_Stat PowerPoint. Use Two Sample Assuming Equal Variances. 9
