To win on a breach-of-contract claim, the party asserting the claim must prove that the other party to the contract caused the non-breaching party to incur damages. In construction disputes, the non-breaching party (e.g., a contractor or subcontractor) will often claim that it incurred lost profits due to the other party’s breach.
For example, if an owner wrongfully terminates a contractor, the contractor may be entitled to the profit that it was going to make on the project but for the owner’s termination of the contract. But to obtain those lost profits, the contractor will have to offer supporting evidence.
Under Florida law, damages must be proven with a reasonable degree of certainty, and damages cannot be based on speculation or guesswork. The burden of proof is on the party seeking damages. (For an example of a contractor failing to carry its burden as to damages, click here.)
A contractor or subcontractor seeking lost profits should offer evidence of not only the amount it would have received had the contract been fully performed (e.g., the contract price), but also the amount of any costs or other expenses that the contractor or subcontractor has yet to incur.
Evidence of the cost of labor, equipment, materials, and overhead before the breach should be offered. Also, evidence of the remaining expenses to complete the work should also be introduced. That may be done by showing evidence of how the contract price was determined and the amount charged per unit of work.
What won’t work is offering the mere testimony of a contractor’s owner stating that the contractor would have made X% of profit based on the contractor’s bid for the work. That evidence, standing alone, is not enough to support an award of lost profits.
In the context of a wrongful termination of a construction contract, the terminated party should offer evidence of its costs up until the time it was removed from the job. Also, the terminated party should offer evidence of its anticipated costs to complete its work at the project. The difference between those two amounts would indicate the terminated party’s lost profit, if any.
In construction disputes, damages don’t always take first priority, but they should. If you can’t prove your damages, then you need to consider whether the claim is worth pursuing. Every contractor or subcontractor that does not have a job proceed as expected wants its lost profits. Care should be taken to determine how to prove those lost profits.
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