
The New Business Rule and Compensation for Lost Profits
Not so long ago, most American jurisdictions followed the “new business rule.” If a business did not have a history of profitable operations, it would have been denied recovery for lost profits. That has changed. The prevailing wisdom nowadays replaced a per se rule with a rule of evidence—damages must be proven with reasonable certainty, regardless of whether the claimant was a new business.
However, the prevailing wisdom is wrong. The damages for a new business ought not be viewed as merely a matter of whether the evidence is sufficient to surmount the “reasonable certainty” hurdle. The new business rule … Read more