For an innocent buyer, which damages are recoverable in case of breach by the seller?

• A. Loss of bargain only
• B. Loss of profits only if the seller knew about the buyer's development plans
• C. Loss of bargain and loss of profits in all cases
• D. Neither loss of bargain nor loss of profits

Answer: (B)

When damages are awarded for a seller’s breach, the aim is to place the innocent party in the position they would have been in if the contract had been performed. The basic measure is loss of bargain, the difference between the contract price and the value of the property had it been delivered as agreed. But recovery of profits—the extra profits the buyer hoped to make from developing the property—is not automatic. Those profits are only recoverable if they were within the contemplation of both parties at the time of contracting. In practical terms, that means the seller must have known about the buyer’s development plans (or those plans must have been foreseeably within the seller’s contemplation as a probable consequence of breach).

So, profits can be recovered only where the seller knew about the buyer’s plans; without that knowledge, such profits aren’t recoverable. This explains why the correct choice states that loss of profits is recoverable in the special case where the seller was aware of the buyer’s development plans. The other options either overstate the universality of profit damages or ignore the foreseeability requirement.