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One of the first questions I am typically asked by prospective clients who are interested in seeing if it is worthwhile to pursue a breach of contract action, is this:

"How much money can I recover if I win my breach of contract lawsuit if I started work, and the other side backed out in the middle?"

It's a fair question.

Under New York law, the court will apply the following formula to determine your damages (assuming, of course, you can demonstrate all of the elements needed to prove that the other side breached the agreement):

“When a contractor has partially performed under the contract and is prevented by the defendant from completing performance, the measure of damages is to be computed by deducting two amounts from the agreed contract price. First, you must deduct payments, if any, already made to the plaintiff under the contract. Second, you must deduct the costs that the plaintiff would have incurred had (he, she, it) completed the contract. In this way, the plaintiff will receive the amount due under the contract for the work completed plus the profit that (he, she, it) would have earned on the uncompleted work had (he, she, it) been permitted to complete it.”

This rule makes sense; it allows the non-breaching plaintiff to recover the profits they would have earned had the defendant lived up to their end of the deal. It also means that the plaintiff must account for the expenses they would have incurred had the contract been completed.

Jonathan Cooper
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Non-Compete, Trade Secret and School Negligence Lawyer