Contracts II, Pages 1119–1122

Kenford Co. v. County of Erie (2)

Court of Appeals of New York, 1986

Procedural History:

  • Appellate Division modified the judgment by denying damages for the managerial contract and out-of-pocket expenses from before the breach. A new trial was ordered to determine what the land would have been worth as raw acreage immediately following construction of the stadium for the loss of appreciable land value.

Issue:

Can one recover a loss of prospective profits on a 20-year managerial contract of a proposed domed stadium?

Rule:

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Loss of future profits as damages for breach of contract have been permitted in New York under long-established and precise rules of law.

  1. First, it must be demonstrated with certainty that such damages have been caused by the breach and,
  2. second, the alleged loss must be capable of proof with reasonable certainty.
    • In other words, the damages may not be merely speculative, possible or imaginary, but must be reasonably certain and directly traceable to the breach, not remote or the result of other intervening causes.
  3. In addition, there must be a showing that the particular damages were fairly within the contemplation of the parties to the contract at the time it was made.
If it is a new business seeking to recover for loss of future profits, a stricter standard is imposed for the obvious reason that there does not exist a reasonable basis of experience upon which to estimate lost profits with the requisite degree of reasonable certainty

Reasoning:

Plaintiff's proof was consistent with modern economic theory and presented by recognized experts. Such a procedure has long been accepted as proof. Nevertheless, this does not satisfy the requirement that it be in the contemplation at the time of the execution or breach of the contract. In addition, the calculations were based on assumptions, as they must be because there is only one dome currently like was proposed. Many things could change in twenty years. Entertainment in general has an inherent uncertainty to it, and sports teams do as well.

Holding:

No, one cannot recover prospective profits on a 20-year managerial contract of a proposed domed stadium. Affirmed.