Lost profits damages for a seller: which statement is true?

• A. Lost profits are recoverable only if the seller is a volume dealer
• B. Lost profits are never recoverable
• C. Lost profits are the contract price minus resale price
• D. Lost profits are always recoverable

Answer: (A)

The idea being tested is the lost-volume seller rule. When a seller’s contract is breached, the attempt to put the seller back in the position they would have been in focuses on the profits that would have been earned from the sale that was lost. But that measure only applies if the seller is a volume dealer—someone who would have made the same sale anyway even without this particular contract because they routinely sell to multiple customers.

If the seller is a volume dealer, the breach by the buyer deprives them of a sale they would have made in the ordinary course, so they can recover the profit that would have been earned on that lost sale. If the seller is not a volume dealer, there isn’t a second, ordinary sale to compensate for, so lost profits on that specific sale aren’t recoverable as such; damages are measured differently, often limited to the price-related remedies tied to resale or other applicable measures.

That’s why the true statement is that lost profits damages for a seller are recoverable only if the seller is a volume dealer. The other propositions misstate how damages are measured or when recoveries are permitted.