What is lost profits?

This term could be said to be a mix between financial and legal concepts, which means that we have to have a basic understanding of both.

In general, the term loss of profit refers (according to article 1106 of the Civil Code) to the profit that has ceased to be obtained as a result of the fact for which one is responsible. Or put another way, it is the profit that a contractor does not receive due to non-payment of the person who has completed the contract.

Loss of profits in the Civil Code

There are two titles of attribution of civil responsibility:

  • Contractual: when in the performance of a contract one of the parties incurs negligence, fraud, delinquency, or contravenes the tenor of the obligation.
  • Non-contractual: human behaviors that cause harm to someone intervenes without a prior contractual link between the cause of the damage and the victim, occurring because of the person who does the damage. It is known as a civil offense, as opposed to a criminal offense or crime, which can lead to civil liability.

In both cases, the author of the damage must repair what has been caused to the person who has suffered it. If there is contractual fault, there will be a forced performance or provide that which reports the fulfillment of the obligation. In the event of non-contractual fault, you are free if the author repairs the damage caused in any way.

In contractual fault, the obligation of compensation (caused by the breach of the contract the one who has done the damage), you must answer:

  • In case of fraud: answer the debtor of the damage caused.
  • In the event of delay, fault or violation of good faith: the damages to which it is liable will be those that could have been foreseen at the time the obligation was formed. The damage will be a necessary consequence for the causal event if there is good faith; and it is enough if the consequence is known, in the event that there is bad faith.

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