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Simple English definitions for legal terms
new-business rule
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A quick definition of new-business rule:
New-Business Rule: This is a rule that says if a business has not been making money recently, they cannot get compensation for lost profits. This is because it is too hard to guess how much money they would have made.
A more thorough explanation:
The new-business rule is a principle that prevents a business from being awarded damages for lost profits if it has no recent record of profitability. This is because the damages would be too speculative.
Let's say a new restaurant opens up in town and is hit by a natural disaster that causes it to close for several months. The restaurant owner sues for lost profits during that time. However, since the restaurant is new and has no record of profitability, the court may apply the new-business rule and deny the claim for lost profits.
Another example could be a startup company that has not yet made any profits. If the company suffers damages due to a breach of contract, it may not be able to recover lost profits under the new-business rule.
These examples illustrate how the new-business rule can prevent businesses from being awarded damages for lost profits when there is no clear record of profitability. This helps to ensure that damages are awarded based on actual losses, rather than speculative projections.