Limits on Contract Damages: Reasonable Certainty

Q: What are the three limits on contract damages?

A: Mitigation, foreseeability, and certainty.

Q: How are the three limits related?

A: They are independent; each can reduce or bar recovery on its own.

Q: What does mitigation focus on?

A: Plaintiff’s post-breach conduct (reasonable steps to reduce loss).

Q: What does foreseeability focus on?

A: Whether the type of loss was foreseeable at the time of contracting.

Q: What does certainty focus on?

A: Whether the plaintiff can prove the fact and amount of loss.

Q: Key distinction: foreseeability vs. certainty?

A: Foreseeability = type of loss; certainty = proof of loss.

Q: What two things must certainty establish?

A: (1) Fact of loss and (2) amount of loss.

Q: What happens if the fact of loss is uncertain?

A: The claim is barred, even if the amount is certain.

Q: What happens if the amount is uncertain?

A: The claim may still fail unless it can be reasonably estimated.

Q: What is the rule under Restatement § 352?

A: Damages must be proven with reasonable certainty.

Q: Does certainty require mathematical precision?

A: No—only reasonable certainty.

Q: What are “speculative” damages?

A: Damages lacking a reliable evidentiary basis; they are barred.

Q: What does the Babette bike race example illustrate?

A: Even with a known amount, failure to prove the fact of loss bars recovery.

Q: Why does Babette’s claim fail?

A: She cannot prove she would have won (fact of loss is speculative).

Q: What is the key lesson from Babette?

A: Certainty requires more than confidence or past success.

Q: What does V.A.L. Floors v. Westminster Communities illustrate?

A: Lost profits can be proven with reasonable certainty using a track record.

Q: What evidence supports certainty for lost profits?

A: Historical data, past profits, and consistent business performance.

Q: What is the “at the door of the wrongdoer” principle?

A: Uncertainty caused by the breach is attributed to the breaching party.

Q: What is “essential justice” vs. “perfect justice”?

A: Essential = reasonable estimate; Perfect = exact proof (not required).

Q: Why are lost profits inherently difficult to prove?

A: They are forward-looking and involve uncertainty.

Q: What is the “new business problem”?

A: New businesses lack a track record, making certainty harder to prove.

Q: Are new businesses barred from recovering lost profits?

A: No, but the burden is much higher.

Q: What can new businesses use to prove certainty?

A: Industry data, expert testimony, comparables.

Q: Why is certainty easy for cover damages?

A: It uses concrete numbers (contract price vs. cover price).

Q: Why is certainty harder for lost profits?

A: It requires comparing actual results to a hypothetical scenario.

Q: Can damages be certain but still unrecoverable?

A: Yes—if they fail foreseeability or mitigation.

Q: Example of certain but unrecoverable damages?

A: The $15,000 catering loss (fails foreseeability).

Q: Can damages be foreseeable but still barred?

A: Yes—if they are speculative under certainty.

Q: What is the two-phase damages framework?

A: Phase 1: Calculate expectation damages
Phase 2: Apply mitigation, foreseeability, certainty

Q: What role do the three limits play?

A: They act as filters that can only reduce or eliminate recovery.

Q: Must each damage item pass all three limits?

A: Yes, independently.

Q: What is the key takeaway for certainty?

A: The plaintiff must provide a reliable evidentiary basis for both the fact and amount of loss.