Sierra Nevada Trees, Inc.
Student Coaching Notes
1
Recovery of Lost Profits

Is the Lost Profits Limitation Clause Part of the
Contract?

May an Established Business Recover Lost
Profits Based on Projection of Future Income?
2
Is the Lost Profits Limitation
Clause Part of the Contract?
Is there an Acceptance?
Rejection & Counter Offer
- Definite
- Timely
- Not Conditional
on Offeror’s Assent
Are the Additional/Different
Terms Part of Contract?
Both Parties Merchants
Yes, unless
- Material Alteration
- Offer Limit Acceptance
- Offeror Objects
At Least One Party is Not a Merchant
No, unless Offeror Expressly Consents
3
Material Alteration
 Surprise or Hardship Standard
 Clauses that deny implied warranties
 Clauses that require arbitration
 Clauses that limit remedies
4
May an Established Business
Recover Lost Profits Based on
Projection of Future Income?
 Reasonable Certainty Standard
 Not Speculative in Nature
 No Absolute Precision is Required
 May Rely on Statistical Models based
on Past Financial Data
5
Question 2a:
Getting the Histogram

Use Excel to Calculate Profits on Spreadsheet
File Sierra Case.

Divide Profits Range (Highest Minus Lowest) by
6 to Get Bin Size and Round to Nearest 1000’s.

Manually Input 6 Upper Values of Bins into
Column of Spreadsheet File Sierra Case.

Follow Directions for Constructing Histograms on
Using_Excel_for_Stat PowerPoint.
6
Questions 2b & 2c:
Descriptive Statistics

Follow Directions for Descriptive Statistics
on Using_Excel_for_Stat PowerPoint.

Use a 99% Confidence Level when Using
Excel.
7
Question 2 d:
Expected Exposure

Expected Exposure = Construction Costs +
Total Expected Profits for Six Months

Basis for Compensation
8
Question 4:
Hypothesis Test

Test Mr. Washington’s Claim that Offer
Underestimated Lost Profits (Profit
Increased During Last Six Months).

Follow Directions for Hypothesis Testing
on Using_Excel_for_Stat PowerPoint.

Use Two Sample Assuming Equal
Variances.
9
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