MBE Rules · Remedies
Lost Profits Certainty
New-business rule (modernized)
The rule
Lost profits must be shown with reasonable certainty; established businesses use track records, and California allows new businesses to prove profits by expert projections, comparable operations, and market data rather than a per se bar.
In plain English
To recover lost profits, a plaintiff must demonstrate that the profits were reasonably certain and not speculative. Established businesses can rely on their past performance, while new businesses in California can use expert projections and market data to establish potential profits.
Worked example
A new restaurant owner claims lost profits after a fire forced the closure of their establishment. They present expert projections based on similar restaurants in the area and market trends, showing they would have made $100,000 in profits. The court finds the evidence sufficient to award damages for lost profits.
Memory hook
Lost profits need certainty, not speculation—track records for the old, projections for the new!
The trap
Students often confuse the standards for established versus new businesses, mistakenly applying the stricter requirements to new ventures. They may overlook the allowance for expert projections in California.
How examiners test it
Questions often present scenarios involving both established and new businesses, testing the student's understanding of how to prove lost profits under varying circumstances.
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