Expectation damages or “benefit of the bargain” damages are one way to measure damages for breach of contract claims in business litigation. Under Florida law, where there is a “total breach of contract,” the alleged non-breaching party can elect to seek recovery of “expectation damages” or “reliance damages” resulting from the breach of contract. Expectation damages aim to place the non-breaching party in the same position as they would have been if the contract was actually performed. Peter Mavrick is a Miami business litigation attorney, and represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.
If “there is a total breach of contract, the non-breaching party may affirm the contract, insist upon the benefit of his bargain, and seek damages that would place him in the position he would have been in had the contract been completely performed.” 24 Hr Air Serv., Inc. v. Hosanna Cmty. Baptist Church, Inc., 322 So. 3d 709 (Fla. 3d DCA 2021). “Under this benefit-of-the-bargain theory, ‘the proper measure of damages would be either the reasonable cost of completion, or the difference between the value the repair would have had if completed and the value of the repair that has been thus far performed.” Tubby’s Customs, Inc. v. Euler, 225 So. 3d 405 (Fla. 2d DCA 2017).
Where performance is rendered impossible by the breach, the non-breaching party “may elect between reliance damages (those costs and expenses of preparing to perform, the recovery of which will place the recipient in the position it occupied before entering into the contract) or lost profits (the benefit of the bargain or ‘expectation interest’).” Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So.3d 667 (Fla. 3d DCA 2011). If a party elects to pursue expectation damages, they can only recover profits “which would have been possible only if the contract would have been fully performed by the [non-breaching party].” Pathway Fin. v. Miami Int’l Realty Co., 588 So. 2d 1000 (Fla. 3d DCA 1991).
Lost profits are one example of expectation damages recoverable under Florida law. Florida courts typically “require proof of lost profits (income less expense) rather than merely lost gross revenue” in business litigation involving contractual disputes. HCA Health Services of Florida, Inc. v. CyberKnife Ctr. of Treasure Coast, LLC, 204 So. 3d 469 (Fla. 4th DCA 2016). In a typical lost profits case, “the proper computation of damages requires the non-breaching party to deduct from anticipated contract revenue the costs incurred in performing the contractual services.” Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So. 3d 667 (Fla. 3d DCA 2011). These costs may include “an appropriate allocation of overhead as well as any personnel expenses that would have been incurred” absent a breach of contract.” Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So. 3d 667 (Fla. 3d DCA 2011). Another example of expectation damages is where a lessor’s damages are measured by “the difference between the rentals stipulated to be paid and what, in good faith, the landlord is able to recover from a re-letting.” Kanter v. Safran, 99 So. 2d 706 (Fla. 1958).
A party can only recover expectation damages if such damages can be calculated with reasonable certainty. Documentation that only demonstrates a business’ loss of income or its gross receipts, without specific evidence showing expenses, is inadequate to prove lost profits. E.T. Legg & Assocs., Ltd. v. Shamrock Auto Rentals, Inc., 386 So. 2d 1273 (Fla. 3d DCA 1980). Nonetheless, “an inability to establish the amount of lost profits with absolute exactness will not defeat recovery.” Del Monte Fresh Produce Co. v. Net Results, Inc., 77 So. 3d 667 (Fla. 3d DCA 2011). Thus, Florida court’s require “reasonable certainty” in the proof of expectancy damages and the assumptions underlying them. R.A. Jones & Sons, Inc. v. Holman, 470 So. 2d 60 (Fla. 3d DCA 1985). Indeed, expectation damages “cannot be based upon speculation or guesswork, but must have some reasonable basis in fact.” Smith v. Austin Dev. Co., 538 So. 2d 128 (Fla. 2d DCA 1989).
Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.