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A Comprehensive Overview of the Indemnification for Loss of Profits ("Lucro Cesante") in Spanish Civil Law

Indemnification for "lucro cesante", or loss of profits, encompasses the damages entitled to a creditor due to the loss of potential gains. In specific cases, this compensation arises from either contractual breaches or loss of profits resulting from damage caused by another person due to unlawful acts or negligence.

Article 1106 of the Civil Code outlines the principles regarding indemnification for damages and losses: “The indemnification for damages and losses includes not only the value of the loss suffered but also the profit that the creditor has failed to obtain, except as provided in the following articles.”

In essence, damages and losses can be categorized into two types:

a) Those resulting from the value of the suffered loss.

b) Future losses due to the loss of profits.

For example, consider a scenario where a vehicle collides with a taxi, causing both material damage and a 20-day repair period. Two distinct damages arise:

a) Compensation for repairing the vehicle (value of the loss suffered).

b) Compensation for loss of profit during the 20 days the taxi is out of service (indemnification for lucro cesante).

A notable case is the Supreme Court's decision dated 9th April 2012:

"Loss of profits, constituting lucro cesante damages, are patrimonial damages that must be indemnified in cases of contractual breaches, as stated in Article 1106 of the Civil Code. The determination of lucro cesante requires proof, particularly for future losses, demanding a prospective evaluation, often necessitating expert assistance." (Note: expert assistance could consist on a third party expert report justifying and quantifying the losses).

The court emphasizes the need for a balanced approach, avoiding the rejection of lucro cesante as hypothetical or unconditional acceptance without evidence. Courts must calculate its value based on reasonable and market-related projections, considering all relevant circumstances.

The complexity of the modern economy requires acknowledging not only established economic realities but also future economic expectations. Proving future loss of profits poses challenges, relying on prospective assessments rather than measurements of past economic situations.

Courts may utilize the principle of "res ipsa loquitur" in cases where a prudent calculation demonstrates the future loss of profits.

Given the evidentiary challenges associated with proving lucro cesante, the doctrine relies on an intermediate criterion based on objective probability guidelines, considering the normal course of events and case-specific circumstances. Striking a balance between rejecting lucro cesante as purely hypothetical and unconditional acceptance without evidence, courts apply criteria of reasonable likelihood. The assessment of proof should be based on reasonable verisimilitude, avoiding inclusion of unverified future events akin to speculative dreams of fortune.

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