Expert Forensic Accountants Assess Breach of Contract Damages
Calculations for attorneys representing plaintiffs and defendants
Contracts are the life’s blood of a business. But when your contract partners fail to perform according to your agreement, you can lose the benefit of the bargain and suffer damaging losses. You have a right to recover compensation, and a capable attorney can probably prove the necessary elements. But how much have you lost? Miscalculating your prayer for damages can do just as much harm as the original breach. You could win your case and still suffer undue financial hardship. Fortunately, North American Forensic Accounting PC is ready to help. Our forensic accounting investigative experts’ pore over financial records to calculate the amount of general and specific damages. On the other hand, a defendant company might be looking at unreasonable demands for exorbitant damages. In that case, estimation from NAFA can provide evidence that leads to a less costly settlement.
Ensuring robust damage computation in breach of contract cases
Damages in breach of contract cases are intended to place the innocent party in the position they would enjoy if the breaching party had performed as agreed. Importantly, the breaching party must pay compensatory damages to reimburse the non-breaching party for any financial losses stemming from the breach. There are two categories of compensatory damages:
- General damages are the most immediate losses and include items such as increased costs and overhead. For example, if you agreed to purchase goods at a certain price, and now have to pay another vendor a higher price, you are entitled to recover the difference. Overhead comes into play when the breaching party’s failure forces a delay. You have fixed costs that you must pay, even if you’re unable to do business because of the breach.
- Special damages —More attenuated, but still directly related to the breach, these are losses that were foreseeable at the time you formed the contract. These losses include unrealized revenues. If you are unable to do business because of the breach, you’ve lost profits you could have earned, and for this you should be compensated. The breach might also prevent you from meeting your own obligations to your clients, which can result in reputational damage, as well as breaches for which you could be liable. You should be able to recover for this cascade of losses.
General damages are the easier calculation. Special damages present a greater challenge, because a claim must be rooted in fact, not simple speculation. At NAFA, we have the knowledge and skill to perform an in-depth analysis of the company’s financials to arrive at a defensible damage estimate.
Calculations of other breach of contract damages
Depending on circumstances and litigation strategy, plaintiff’s attorneys may seek other damages. For their part, defense counsel might counter the plaintiff’s demand with an offer from another category of damages. These can include:
- Liquidated damages — Many contracts, especially in the construction industry, will contain provisions to compensate a nonbreaching party for losses incurred because of delayed performance. These are pre-set amounts based on estimates of lost profits. Liquidated damages cannot be so high that they constitute a penalty in addition to compensation.
- Quantum meruit — This Latin phrase roughly means “the amount earned.” With these types of damages, the breaching party reimburses the nonbreaching party for the value of its performance under the contract.
- Punitive or exemplary damages — Courts only order payment in cases of particularly egregious conduct to punish the company and deter others from acting the same way. Often, punitive damages are a multiple of the compensatory damages. Many states have enacted laws calling for treble (or three times) damages.
- Restitution — Instead of giving the nonbreaching party the benefit of the bargain, restitution restores that party to their position before the contract. Restitution will usually reimburse the nonbreaching party for their expenses related to the contract.
Whatever litigation strategy you choose to pursue, our NAFA team can perform calculations of damages supported by clear data.
Why you should choose NAFA for your breach of contract calculation
NAFA is comprised of certified experts in forensic investigations, as well as experienced audit leaders. We have the knowledge, skill, and resources to tackle the most complex investigations. We also have industry-specific knowledge that enables us to delve deeply into business records and understand the implications of various entries. In contentious cases, we provide comprehensive litigation support that includes assistance with discovery and credible testimony as expert witnesses.
Contact North American Forensic Accounting PC for calculations of breach of contract damages
As part of our comprehensive litigation support, North American Forensic Accounting PC calculates breach of contract damages for companies of all sizes. To learn more, call us at 347-286-4860 or contact one of our offices online to schedule an appointment. Headquartered in Harrisburg, PA, NAFA serves clients throughout the United States, including in Philadelphia, Pittsburgh, New York City, Atlanta, Charlotte, Miami, and the Tampa Bay Area.