CACI 352 Loss of Profits—No Profits Earned

California Civil Jury Instructions CACI

352 Loss of Profits—No Profits Earned

To recover damages for lost profits, [name of plaintiff] must prove that it is reasonably certain [he/she/nonbinary pronoun/it] would have earned profits but for [name of defendant]’s breach of the contract.

To decide the amount of damages for lost profits, you must determine the gross, or total, amount [name of plaintiff] would have received if the contract had been performed and then subtract from that amount the costs [including the value of the [labor/materials/rents/expenses/interest on loans invested in the business]] [name of plaintiff] would have had if the contract had been performed.

You do not have to calculate the amount of the lost profits with mathematical precision, but there must be a reasonable basis for computing the loss.

Directions for Use

This instruction applies to both past and future lost profit claims. Read this instruction in conjunction with CACI No. 350, Introduction to Contract Damages, or CACI No. 351, Special Damages.

Insertion of specified types of costs to be deducted from gross earnings is optional, depending on the facts of the case. Other types of costs may be inserted as appropriate.

Sources and Authority

Damages Must Be Clearly Ascertainable. Civil Code section 3301.

“Lost profits may be recoverable as damages for breach of a contract. ‘[T]he general principle [is] that damages for the loss of prospective profits are recoverable where the evidence makes reasonably certain their occurrence and extent.’ Such damages must ‘be proven to be certain both as to their occurrence and their extent, albeit not with ‘mathematical precision.’ ” (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773−774 [149 Cal.Rptr.3d 614, 288 P.3d 1237].)

“Where the fact of damages is certain, the amount of damages need not be calculated with absolute certainty. The law requires only that some reasonable basis of computation of damages be used, and the damages may be computed even if the result reached is an approximation. This is especially true where, as here, it is the wrongful acts of the defendant that have created the difficulty in proving the amount of loss of profits or where it is the wrongful acts of the defendant that have caused the other party to not realize a profit to which that party is entitled.” (GHK Associates v. Mayer Group (1990) 224 Cal.App.3d 856, 873–874 [274 Cal.Rptr. 168], internal citations omitted.)

“Historical data, such as past business volume, supply an acceptable basis for ascertaining lost future profits. [Citations.] In some instances, lost profits may be recovered where plaintiff introduces evidence of the profits lost by similar businesses operating under similar conditions. [Citations.]” (Sargon Enterprises, Inc.supra, 55 Cal.4th at p. 774.)

“Regarding lost business profits, the cases have generally distinguished between established and unestablished businesses. ‘[W]here the operation of an established business is prevented or interrupted, as by a … breach of contract … , damages for the loss of prospective profits that otherwise might have been made from its operation are generally recoverable for the reason that their occurrence and extent may be ascertained with reasonable certainty from the past volume of business and other provable data relevant to the probable future sales.’ ” (Sargon Enterprises, Inc.supra, 55 Cal.4th at p. 774.)

“ ‘On the other hand, where the operation of an unestablished business is prevented or interrupted, damages for prospective profits that might otherwise have been made from its operation are not recoverable for the reason that their occurrence is uncertain, contingent and speculative. [Citations.] … But although generally objectionable for the reason that their estimation is conjectural and speculative, anticipated profits dependent upon future events are allowed where their nature and occurrence can be shown by evidence of reasonable reliability.” (Sargon Enterprises, Inc.supra, 55 Cal.4th at p. 774.)

“Unestablished businesses have been permitted to claim lost profit damages in situations where owners have experience in the business they are seeking to establish, and where the business is in an established market.” (Resort Video, Ltd. v. Laser Video, Inc. (1995) 35 Cal.App.4th 1679, 1698–1699 [42 Cal.Rptr.2d 136], internal citations omitted.)

“Even if [plaintiff] was able to provide credible evidence of lost profits, it must be remembered that ‘[w]hen loss of anticipated profits is an element of damages, it means net and not gross profits. Net profits are the gains made from sales ‘after deducting the value of the labor, materials, rents, and all expenses, together with the interest of the capital employed.’ ” (Resort Video, Ltd., supra, 35 Cal.App.4th at p. 1700, internal citations omitted.)

“It is the generally accepted rule, in order to recover damages projected into the future, that a plaintiff must show with reasonable certainty that detriment from the breach of contract will accrue to him in the future. Damages which are remote, contingent, or merely possible cannot serve as a legal basis for recovery.” (California Shoppers, Inc. v. Royal Globe Insurance Co. (1985) 175 Cal.App.3d 1, 62 [221 Cal.Rptr. 171], internal citations omitted.)

Secondary Sources

1 Witkin, Summary of California Law (11th ed. 2017) Contracts, §§ 904–907
California Breach of Contract Remedies (Cont.Ed.Bar 1980; 2001 supp.) Recovery of Money Damages, §§ 4.11–4.17
15 California Forms of Pleading and Practice, Ch. 177, Damages, § 177.79 (Matthew Bender)
6 California Points and Authorities, Ch. 65, Damages, § 65.21 (Matthew Bender)
1 Matthew Bender Practice Guide: California Contract Litigation, Ch. 7, Seeking or Opposing Damages in Contract Actions, 7.12