Legal Principles of Lost profits
Video Transcript
When forensic accountants prepare damage reports or lost profit reports, they can normally assume that there is a strong legal principle that will back up these damages. 📌 In order for damage reports to be successful, the attorney must win on legal issues. 📌 It is important as a forensic accountant to have some background for understanding of legal principles in lost profit cases, as you cannot always assume the attorney has fully researched the applicable laws. ➡️ The principle behind lost profits is fundamentally compensatory: the defendant’s wrongful actions caused the plaintiff to lose profits that the plaintiff otherwise would have earned. The result of an award of the damages will make the plaintiff whole. ➡️ Two Types of Damages: 📌 Direct or General Damages result from a breach, the plaintiff is seeking general damages to recover the value of a performed promise. 📌 Consequential or Special Damages seek to compensate the plaintiff for additional losses that are the result of defendant’s breach. ➡️ To Prove Lost Damages the Following Must be Shown: 1. Existence of lost profits 2. Proximate cause of lost profits 3. Foreseeability 4. Amount of lost profits 5. Mitigation of damages