Loss of profits

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Not the same thing as consequential loss, though in many cases it is a type of consequential loss. It is possible for a loss of profits or loss of opportunity to be a direct loss, although the great case of Hadley v Baxendale illustrates that is by no means the ordinary run of things.

But there are obvious cases of losses of profit that are direct losses: Such as, the profit I would make in making and selling you a widget you had agreed to purchase from me, had you not reneged on your obligation to buy it. Which means there are schoolboy errors ahoy:

Not the same as an account for profits

The remedy of special damages for loss of profits — when available, which will be hardly ever — compensates an innocent party to a contract for opportunities and profits she would have been able to take had the guilty party not breached the contract. This is different from the remedy of “accounting for profits”, which is a common law remedy for misuse of someone else’s property where the guilty party must disgorge to the owner any profits it has actually made in breach of his contractual or fiduciary duty.

Tricks for young players

If you exclude liability for “consequential loss including loss of profits” that will not immunise you from liability for losses of profits that were direct losses. Polypearl Limited v E.ON Energy Solutions Limited [2014] EWHC 3045.

In Polypearl Limited v E.ON Energy Solutions Limited [2014] EWHC 3045 Polypearl entered a contract with E.ON under which E.On had to buy 153,000m³ of cavity wall adhesive. Don’t laugh — this is someone’s livelihood. E.ON failed to purchase it, and as a result Polypearl suffered a loss of profit on the actual sale of those contracts of over two million quid (essentially its revenue less costs of production). Polypearl also claimed a loss of opportunity to share in carbon savings it would have made had the contract been performed.

E.On claimed exclusion for liability for “any indirect or consequential loss, (both of which include, without limitation, pure economic loss, loss of profit, loss of business, depletion of goodwill and like loss) howsoever caused (including as a result of negligence)”

The Judge found this a good example of a loss of profit that was a direct loss, and that this liability was not therefore excluded by that exclusion. Sensible outcome reached.

See also

• Account for profits
• Hadley v Baxendale
• Remoteness of damage
• Breach of contract