The Second Circuit today vacated a district court ruling that barred the victim of a contract breach from recovering profits it lost as as result of the other party’s violation of a long-term energy supply contract.  The court distinguished profit losses that count as "consequential" damages from those arising from the breaching party’s failure to pay money.  Although both types capture loss of profits, the latter "are the direct and probable consequence of the breach."  The difference matters because a less stringent standard of proof applies to general damages — the non-breaching party must prove only the "fact" of damage with certainty.  Tractebel Energy Marketing, Inc. v. AEP Power Marketing, Inc., Nos. 05-2985-cv & 05-5136-cv (2d Cir. May 22, 2007) (applying New York law) (available at www.ca2.uscourts.gov).

Barry Barnett

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