In the business world, where contracts form a core part of economic activity, their proper performance is a key element in ensuring financial stability and legal certainty between the parties. However, when a breach of contract occurs, the conflict transcends purely legal grounds and takes on an economic-financial dimension that demands specialized analysis.<\/p>\n
In this context, the economic-financial expert report emerges as a key evidentiary tool for the adequate defense of the parties\u2019 financial interests.<\/p>\n
The role of the financial expert goes beyond the mere calculation of figures and focuses on reconstructing the altered economic reality, substantiating the actual loss, and determining its economic scope using objective and methodologically sound criteria.<\/p>\n
According to Article 335 of the Spanish Civil Procedure Act (Ley de Enjuiciamiento Civil, LEC), \u201cwhen scientific, artistic, technical or practical knowledge is necessary to evaluate relevant facts or circumstances in the case or to ascertain certainty about them, the parties may submit the opinion of experts who have the corresponding knowledge.\u201d<\/em><\/p>\n The primary purpose of the expert report is to allow for the correct quantification of damages and losses, ensuring that the resulting compensation adheres to criteria of proportionality, causation, and economic reasonableness. This prevents both unjust enrichment of the injured party and undervaluation of the damage actually suffered.<\/p>\n The compensation for damages and losses is intended to restore the harmed party\u2019s financial situation to the position it would have been in had the breach not occurred. In accordance with Article 1106 of the Civil Code, such compensation includes both actual damages<\/em> (da\u00f1o emergente) and lost profits<\/em> (lucro cesante), concepts that have distinct natures and require differentiated expert treatment.<\/p>\n Actual damages refer to the effective, real loss directly linked to the breach of contract. Proper quantification requires proving not only the existence of the expense or loss but also its necessity, reasonableness, and direct causal relationship with the damaging event. This includes both losses already realized and those future costs which, with a high degree of certainty, result from the prolonged consequences of the breach.<\/p>\n An especially relevant aspect in valuing actual damages is updating the claimed amounts to account for inflation or loss of purchasing power. If the damage occurred prior to the legal claim, it is essential to apply capitalization criteria that preserve the real economic value of the loss. This ensures that the compensation adequately reflects the harm at the time of the judicial decision.<\/p>\n Lost profits represent the gain forgone as a direct consequence of the breach of contract. This is the most complex element from an evidentiary standpoint, as it involves a hypothetical scenario that did not actually materialize. For this reason, the case law of the Supreme Court requires its demonstration to be based on reasonable certainty or objective probability, rejecting claims founded merely on expectations.<\/p>\n \u201cJurisprudence has adopted in this area a prudent, restrictive approach, repeatedly stating that it must be rigorously proven that the advantages were actually forgone, without these being doubtful or contingent or based solely on hopes.<\/p>\n In this regard, the April 24, 1997 decision notes that the inclusion of lucrum cessans<\/em> (lost profits) as an element of compensation does not allow incorporating unproven future events bordering on the unknown (\u2018dreams of gain\u2019), nor referring only to real or indisputable occurrences; rather, it requires that the events determining the deployment of resources or efforts truncated by the wrongdoing be indisputably proven to have generated that economic amount, to which \u2014 already fully determined \u2014 only its actual materialization remains.\u201d<\/p>\n<\/blockquote>\n In this context, the economic-financial expert report acquires decisive relevance, as it is the ideal instrument to transform an expected profit into technically sound and legally admissible evidence. The expert must demonstrate that the claimed profits would have been obtained with a high probability had the breach not occurred, relying on historical data, industry information, and actual market conditions.<\/p>\n Quantifying lost profits requires constructing a scenario representing the economic situation in which the harmed party would reasonably have been if the contract had been fulfilled as agreed. To do so, the financial expert employs methodologies recognized by economic doctrine and accepted in judicial practice, such as time-series analysis<\/strong> or comparisons with similar companies or markets<\/strong> not affected by the breach.<\/p>\n Among these valuation methodologies, the Discounted Cash Flow (DCF)<\/strong> method has become the benchmark in corporate finance and economic-forensic analysis. Its application allows integration of historical business performance, projection of future profits, and consideration of the inherent business risk, providing a coherent and defensible estimate of the economic loss suffered.<\/p>\n The choice of discount rate is one of the most important technical decisions in preparing an economic-financial expert report. Although in certain cases the statutory interest rate has been used, from a strictly financial perspective it is more appropriate to employ the Weighted Average Cost of Capital (WACC)<\/em>, as it more accurately reflects the specific risk of the business and the actual cost of the financial resources used.<\/p>\n The WACC incorporates both the cost of equity and the cost of debt, weighted according to the company\u2019s capital structure, and allows correctly calculating the net present value of the cash flows forgone. Its use adheres to the principle of opportunity cost, since the loss of a cash flow implies forgoing its internal return rate, which is typically higher than the statutory interest rate. Courts view positively when the rate used is properly justified and documented, considering that this enhances the reliability of the expert\u2019s opinion.<\/p>\n Judicial experience shows that the success of a breach of contract claim depends largely on the strength of the economic-financial expert report submitted. As noted above, the Supreme Court maintains a particularly strict standard regarding lost profits, rejecting damages based on theoretical or insufficiently substantiated benefits. The report must be coherent, transparent, and methodologically sound, avoiding any risk of double recovery or unjust enrichment.<\/p>\n Likewise, the in-court affirmation (ratification) of the expert report on breach of contract is a phase of special importance, as it allows the expert to explain and defend the methodology used, clarify complex financial concepts, and respond to objections raised by the opposing party, thereby strengthening the report\u2019s evidentiary value.<\/p>\n In practice, submitting an economic-financial expert report is essential, since the Supreme Court regularly rejects lost profit claims that are not backed by sufficient technical evidence, considering them mere expectations lacking an objective basis.<\/p>\n The expert report is not binding, as the judge evaluates the evidence based on his or her own reasoning under Article 348 of the Civil Procedure Act (LEC). However, when the report is properly reasoned, documented, and grounded in accepted methodologies, it usually serves as the primary basis of the judicial decision.<\/p>\n Ratification is a key stage of the process, during which the expert must defend the technical consistency of the analysis and explain in an understandable way the financial criteria employed. A deficient ratification can significantly weaken the evidentiary impact of the report.<\/p>\n Forensic finance has become an essential discipline in identifying, analyzing, and litigating fraudulent conduct in the business sphere. Obtaining solid economic evidence, based on a rigorous examination of financial and accounting information, is a determining factor in the adequate defense of the interests of parties harmed by irregular practices and contract breaches. In this context, Maraz Corporate Finance provides specialized services for preparing economic-financial expert reports, aimed at providing lawyers and legal advisors with a rigorous technical basis for the formulation and support of financial claims and lawsuits.<\/p>\n In an environment of increasing complexity, delivering a properly structured and methodologically sound forensic report can be decisive for the outcome of a judicial proceeding or an out-of-court negotiation. Therefore, legal professionals who require support in preparing and defending economic evidence can rely on Maraz Corporate Finance as a strategic partner in resolving disputes arising from business fraud.<\/p>\n When it is necessary to submit an economic-financial forensic expert report<\/a> to support a judicial claim or an out-of-court negotiation, Maraz Corporate Finance makes its experience and specialization in this field available to legal professionals.<\/p>\nDamages and losses arising from breach of contract<\/h2>\n
Actual damages<\/h3>\n
Lost profits and the requirement of rigorous evidence<\/h3>\n
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Methods for valuing lost profits<\/h3>\n
Discount rate and the relevance of WACC<\/h3>\n
Importance of the expert report on breach of contract in judicial practice<\/h2>\n
FAQs: Frequently asked questions about the expert report on breach of contract<\/h2>\n
Is it essential to provide an expert report to claim lost profits?<\/h3>\n
Is the judge required to follow the conclusions of the financial expert?<\/h3>\n
What role does the ratification of the report play at trial?<\/h3>\n
The added value of Maraz Corporate Finance in economic-financial expert analysis<\/h2>\n