Demand for breach of contract

Whoever breaches the obligations derived from a contract is subject to compensation for damages for breach of contract.

When we start from the compensation of damages for breach of contract, there must be a previously unfulfilled contract.

Article 1.101 of the Civil Code establishes the following: »Those who in the fulfillment of their obligations incur fraud, negligence or late payment, and those who in any way contravene the wording of those are subject to compensation for damages caused. »

Apart from what is indicated in said precept, the Courts and Tribunals have been demanding that the compensatory reparation of article 1.101 of the Civil Code requires not only a non-compliant behavior of a party, but also and also that there be a damage or injury caused to the real and effective counterpart and that is derived from that breach with a cause-and-effect relationship.

The types of damages that can be claimed are “consequential damages” and “lost profits” . As established in article 1.106 of the Civil Code, compensation for damages includes not only the value of the loss that has been suffered, but also that of the gain that the creditor has ceased to obtain.

That is to say, the regulation on damages and losses contemplates the real and effective loss (consequential damage) and the profit left to obtain (loss of profit). The practical problem arises in which concepts should integrate consequential damage and lost profits and, consequently, how both should be calculated in order to support a claim for damages. In this post, the methods commonly used to calculate consequential damages and lost profits in business matters are exposed.

How to calculate the consequential damage : The consequential damage is the real and effective loss and, therefore, true, in which a creditor who claims said damage has incurred. These are the expenses and investments actually paid by the creditor and which are measurable and quantifiable. The most common way to calculate the consequential damage in the business environment is through invoices and bank receipts of payment, the sum of which will yield the figure of the consequential damage.

It is also common for some companies to claim as consequential damages some concepts that, strictly speaking, are not related to the breach or termination of the contract. It is the task of the expert to delimit the scope of the consequential damage in that sense, or to refute the arguments of another expert that sustains that certain items comprise the consequential damage.

How to calculate lost profits : Loss of profits is the amount that the creditor has stopped earning due to the breach that gives rise to the claim. Given that the benefits to be obtained in the future are an uncertain concept, their calculation depends on the hypothesis underlying a projection of said benefits. That is why the methodology that is usually used to calculate lost profits is the valuation of the discount of free cash flows that it was expected to obtain with the interrupted business.

ABOGADOS VELAZQUEZ, has a multidisciplinary team expert in financial law that allows you to contract both the claim for damages and the reports and calculations you need to file the claim without having to go to external professionals.