Gilmore v. Cohen
In Gilmore v. Cohen, 95 Ariz. 34, 386 P.2d 81 (1963), the Supreme Court of Arizona affirmed the lower court's decision that lost profits for a breach of an option contract to sell land were not proven with sufficient certainty to permit recovery.
The parties had entered into a contract that gave the plaintiffs an option to buy 13 parcels of land. The purchasers were residential developers and contractors. Their purchase option would remain open so long as they purchased at least one parcel every ninety days.
After they purchased six parcels, the sellers refused to make any more sales. By then, the purchasers had built homes on the six parcels they have bought, and had sold each one at a profit.
The purchasers sued the sellers for breach of the option agreement, seeking to recover damages for their anticipated lost profits from the resales of the houses they would have built on the remaining parcels.
They argued that the evidence of the profits they had earned on the houses they had built and resold was sufficient to establish with reasonable certainty that they would have earned such a profit on the houses they had planned to build on the lots the sellers had refused to convey.
The only evidence presented by the plaintiffs at trial as to the lost profits was their own testimony.
The court noted that "no books of account or other record of the costs of developing the first six tracts and their selling price were introduced." Gilmore, supra, 95 Ariz. at 36.
It then suggested that, even if formal accounts had not been maintained by the plaintiffs, they could have submitted income tax returns or other "informal memoranda" as proof of profits. Id.
Finally, there was some ambiguity in the testimony as to whether any profit was realized on the six parcels that were sold.
The court affirmed the judgment on the basis that the lost profits sought were too speculative to permit recovery.