VAL Floors, Inc. v. Westminster Communities, Inc.
810 A.2d 625, 355 N.J. Super. 416 (2002)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A contractor's claim for lost profits is not too speculative to be submitted to a jury if it is based on the contractor's past experience and standard bidding methods, even if the underlying costs were not secured by binding contracts. Uncertainty as to the amount of damages will not preclude recovery where the fact of damage is certain.
Facts:
- V.A.L. Floors, Inc. (VAL), a flooring subcontractor, prepared a base bid of $443,000 to install flooring in 55 units for a project owned by Westminster Communities, Inc.
- VAL calculated its bid using its standard method: soliciting material prices from suppliers over the phone and estimating labor costs based on union rates and its past experience in the industry.
- In September 1997, Westminster verbally accepted VAL's bid, forming an oral agreement.
- After the agreement, VAL and its joint venture partner, 3L Company, Inc., spent considerable time developing upgrade programs for buyers and constructed an on-site showroom.
- Based on past experience, VAL and 3L estimated the project, including profitable upgrades, would be worth at least $675,000, with an expected overall profit of at least 33%.
- On April 22, 1998, after VAL and 3L had invested time and effort, a Westminster employee informed them by letter that their relationship was terminated and another supplier would be used.
Procedural Posture:
- V.A.L. Floors, Inc. and 3L Company, Inc. filed suit against Westminster Communities, Inc. in the Superior Court of New Jersey, Law Division (trial court), alleging breach of contract and seeking damages for lost profits and out-of-pocket expenses.
- Westminster filed a motion for summary judgment, arguing both that no enforceable contract existed and that the plaintiffs' claim for lost profits was too speculative.
- The trial court judge denied summary judgment on the contract formation issue but granted summary judgment in favor of Westminster on the damages issue, dismissing the lost profits claim as overly speculative.
- The plaintiffs, V.A.L. Floors, Inc. and 3L Company, Inc., appealed the grant of summary judgment on the issue of lost profits to the Superior Court of New Jersey, Appellate Division.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is a contractor's claim for lost profits, based on its past business experience and cost estimates from unconfirmed telephone price quotes, too speculative as a matter of law to be decided by a jury?
Opinions:
Majority - Weissbard, J.A.D.
No. A contractor's claim for lost profits is not too speculative as a matter of law simply because it is based on experience and cost estimates that are not locked in by binding contracts. The court held that the rule concerning uncertainty of damages applies to the fact of damage, not to its amount. Where it is certain that a breach of contract caused damage, mere uncertainty as to the precise amount will not prevent recovery. The court found that a contractor's profit estimate based on its past business experience and standard bidding methodology provides a reasonably accurate and fair basis for computing lost profits, which is sufficient to present the claim to a jury. Doubts concerning the precision of the damage calculation should be resolved against the party that breached the contract, as that party's wrongdoing created the uncertainty.
Analysis:
This decision reinforces the principle that lost profits need not be proven with mathematical certainty to be recoverable. By allowing a contractor's claim based on industry-standard estimation practices to proceed to a jury, the court lowers the evidentiary burden for such claims at the summary judgment stage. It establishes that an experienced contractor's opinion on anticipated profit constitutes prima facie evidence of loss, shifting the risk of uncertainty in damage calculations from the injured party to the breaching party. This precedent strengthens the position of contractors and other businesses that rely on oral agreements and customary estimating procedures, making it harder for a breaching party to dismiss a claim as 'speculative' simply because all costs were not fixed in writing.
Unlock the full brief for VAL Floors, Inc. v. Westminster Communities, Inc.