Legal Definitions - lucrum cessans

Lucrum cessans is a legal principle referring to the compensation awarded for profits that a party would have earned but lost due to another party's wrongful act, such as a breach of contract or a tort. It focuses on the income or gain that ceased to be realized because of the harmful event, distinguishing it from compensation for direct expenses or actual physical damage incurred.

Here are some examples to illustrate this concept:

• Business Contract Breach: Imagine a specialty coffee shop that contracts with a supplier for a unique, high-demand coffee bean blend. The supplier breaches the contract by failing to deliver the beans on time. As a result, the coffee shop not only loses the money it might have spent on alternative, less profitable beans (a direct loss) but also loses the significant profits it anticipated from selling the popular blend to its customers during the period of non-delivery. The compensation for these lost sales profits would be considered lucrum cessans.

• Property Damage and Business Interruption: Consider a popular concert venue whose main stage is severely damaged by a faulty electrical installation performed by a contractor. The damage forces the venue to close for three months for repairs. Beyond the cost of repairing the stage (a direct loss), the venue also loses all the revenue and associated profits it would have generated from ticket sales, merchandise, and concessions for the concerts scheduled during those three months. The lost profits from these canceled events represent lucrum cessans.

• Professional Negligence Leading to Missed Opportunity: A startup company hires a marketing firm to launch a new product line. Due to the marketing firm's negligent delay in executing the campaign, the product launch is significantly postponed, causing the startup to miss a critical holiday shopping season. Consequently, the startup loses out on a substantial amount of projected sales and market share it would have captured during that peak period. The compensation for these lost projected sales and market share would fall under lucrum cessans.