In many litigation cases, the question is not, “was there a breach”, but rather “what are my damages.” As smart business people, the decision must always be what is my likelihood of success combined with my likely award. Unfortunately, there are many times when one party is as right as rain, but if the damages are not sufficient to support the litigation, it may not be worth filing the complaint.
To determine what damages you may be entitled to, first we look to the Wisconsin Standard Jury Instructions: “3710 Consequential Damages for Breach of Contract.”
The law provides that a person who has been damaged by a breach of contract shall be fairly and reasonably compensated for his or her loss. In determining the damages, if any, you will allow an amount that will reasonably compensate the injured person for all losses that are the natural and probable results of the breach.
This leaves us with the instruction that damages are “all losses that are the natural and probable results of the breach,” but what does that mean? To figure that out, we look to the relevant case law to see how Wisconsin Courts have interpreted that term.
The Wisconsin Courts have really focused on “foreseeability” as the main component of determining damages. The Court, in Thorp Sales Corp. v. Gyuro Grading Co., 111 Wis.2d 431 held
An injured party is only entitled to the benefit of his or her agreement, which is the net gain he or she would have realized from the contract but for the breach. Thorp Sales Corp. v. Gyuro Grading Co., 111 Wis.2d 431, 438-39, 331 N.W.2d 342 (1983).
The Court has also explained how prospective profits, not prospective revenues, fall into that determination:
The long-established rule in Wisconsin, stated in Buxbaum v. G.H.P. Cigar Co., 188 Wis. 389, 392, 206 N.W. 59 (1925), holds that “prospective profits are a legitimate item of damages resulting from a breach of contract when the circumstances are such that the future profits may be computed with some reasonable certainty.” See also 2 The Law of Damages in Wisconsin § 26.16 (Russell M. Ware ed., 2d ed.1995).
The key is that the potential revenues must be shown and offset by the potential costs.
Prospective profits must be diminished by charges composing an essential element in the cost of manufacture or service. Schubert v. Midwest Broad. Co., 1 Wis.2d 497, 503, 85 N.W.2d 449 (1957).
Wisconsin Standard Jury Instruction 3735 “Damages: Loss of Expectation” sets out the standard described in the case law above:
The measure of damages for a breach of contract is the amount which will compensate the plaintiff for the loss suffered because of the breach. A party who is injured should, as far as it is possible to do by monetary award, be placed in the position in which he or she would have been had the contract been performed. The fundamental basis for an award of damages for breach of contract is just compensation for losses necessarily flowing from the breach. A party whose contract has been breached is not entitled to be placed in a better position because of the breach than the party would have been had the contract been performed. The injured party is entitled to the benefit of his or her agreement, which is the net gain he or she would have realized from the contract but for the failure of the other party to perform. Wis JI-Civil 3735 (emphasis added).
Thus, while it is going to differ in every case, and depend on the specific facts and the nature of the breach, it is important to realize that the only consequential damages that Wisconsin Courts are likely to award are those which you can prove were foreseeable losses and missed profit due to the breach. If you believe you may have a claim for a breach of contract, be sure to contact an attorney right away, as the statute of limitations may started to run sooner than you realize. (See “What is the statute of limitations for my business lawsuit”)