The Lost Volume Seller, R.I.P.

Criterion Journal on Innovation, Forthcoming

Columbia Law and Economics Working Paper No. 562

26 Pages Posted: 30 Mar 2017 Last revised: 15 Jun 2017

Date Written: June 14, 2017

Abstract

If the buyer breaches a sales contract, and if the seller can be characterized as a lost volume seller, courts and commentators have argued that the seller should be made whole by compensation for its lost profits. This paper argues that framing the problem in this way leads to an absurd result. The buyer has a termination option and the remedy should be the implicit option price. The lost profit remedy sets a price on that option, a price that bears no relation to reality. Examination of the case law suggests three conclusions: (a) the remedy often sets an excessive implicit option price; (b) courts sometimes give inadequate weight to the explicit option price; and (c) courts will sometimes leap to the lost profit remedy when an adequate remedy already exists.

Keywords: Lost volume, Lost profits, Options, Damages, Remedies

Suggested Citation

Goldberg, Victor Paul, The Lost Volume Seller, R.I.P. (June 14, 2017). Criterion Journal on Innovation, Forthcoming; Columbia Law and Economics Working Paper No. 562. Available at SSRN: https://ssrn.com/abstract=2943036 or http://dx.doi.org/10.2139/ssrn.2943036

Victor Paul Goldberg (Contact Author)

Columbia Law School ( email )

435 West 116th Street
New York, NY 10025
United States
212-854-8380 (Phone)
212-854-0221 (Fax)

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