Question

Alexis, a professional chef, is tired of the restaurant business and decides to open a toy store. She and her CPA project income and expenses; perform site selection studies; and research product lines, advertising approaches, etc.

Alexis locates Louie the Landlord, who plans to construct a small shopping center. Alexis looks at the plans and agrees to lease the corner location. The lease provides that Alexis is guaranteed occupancy by November 1 (at the start of the all-important holiday shopping season).

Alexis CPA starts ordering inventory. Louie, however, has difficulty with the contractor, and the premises are not ready for Alexis until February 1. In the meantime, Alexis must store the inventory and loses the profits that Alexis and her CPA projected for the first three months of operation. Alexis wants Louie to pay the profits that Alexis lost by reason of not being open for three months over the busy holiday season. The CPA's projections showed a net profit of $6,000 for each of those three months. Louie refuses to pay, saying that the delay is not his fault but that of his contractor. Alexis sues Louie and the contractor for loss of profits.

• Should Alexis be able to recover $18,000, the projected net profit for each of the three months the opening of her store was delayed?
• Why or why not?

Answer 1

Yes, Alexis will be able to recover $18,000 from Louie. A breach of lease is when the landlord or tenant breaks one of the provision set out in the lease document. In this situation, when Alexis and Louie comes into and agreement in which Alexis has the guaranteed occupancy by November 1st and Louie was not able to deliver the premises so, Alexis has the full right to evict Louie who breached the lease.

The court acknowledged that when the lost profits were made, the injured party only has to show a reasonable basis for estimating the loss. Louie violation his contract should not be permitted entirely to escape liability because the amount of the damage which was caused is uncertain and when the fact of damages is certain and the only uncertainty is as to the amount, Alexis only has to provide a stable foundation for a reasonable estimate of damages.

When Alexis shows the account evidence and an estimate of the lost profits in court than the court will most likely side with Alexis to recover its loss from Louie.