Claiming lost profits under Bulgarian law

A BSLC client who owns a small manufacturing business contacts us after a supplier unilaterally terminates a supply agreement. As a result, the client suffers direct losses and also loses sales already agreed with third parties. The question is a familiar one. Can I claim compensation for the profit I would have earned?

This is one of the most common situations in civil law, but also one of the hardest to prove. Lost profits form part of pecuniary damage, yet courts apply strict requirements to the evidence supporting them. A poorly prepared claim for lost profits often results in the claim being dismissed in whole or in part.

The issue is particularly important for several reasons.

• Many injured parties underestimate the possibility of claiming economic losses caused by non-performance.
• Others bring a claim without sufficient supporting evidence.
• Case law applies a strict standard and requires certainty rather than assumptions.

BSLC can assist with the following matters.

• Claims for lost profits following a breach of contract.
• Litigation over losses arising from commercial relationships.
• Representation of a person who has suffered a tort, meaning unlawful harm.
• Proof of economic losses through expert evidence.
• Legal representation in civil proceedings.

When does the law allow compensation for lost profits?

The main rule in Bulgarian law is contained in the Bulgarian Contracts and Obligations Act, known by its Bulgarian abbreviation ZZD. A comparable provision in continental legal systems is section 252 of the German Civil Code, BGB, concerning entgangener Gewinn, or lost profits.

Under Article 82 of the Contracts and Obligations Act, compensation covers both the loss actually suffered and the profit foregone.

However, both must be a direct and immediate consequence of non-performance and must have been foreseeable when the obligation arose.

This is a fundamental rule. It means that not every unrealised profit qualifies for compensation.

• If a supplier fails to perform a contract and you lose a specific transaction as a result, this may constitute lost profit.
• If you claim that you would probably have expanded your business, that will generally be insufficient.

The law also draws an important distinction where the debtor acts in bad faith. In that situation, the debtor is liable for all direct losses, including those that were not foreseeable.

Lost profits are not limited to contractual liability. They are also recognised in cases of tort, infringements of competition law under Article 107, paragraph 4 of the Protection of Competition Act, and insured events under Article 430 of the Insurance Code.

The general principle remains the same. There must be a real, rather than hypothetical, loss of a future increase in assets.

If you are considering a claim for lost profits, the first practical step is a consultation with a civil law lawyer. This is when the legal viability of the claim is initially assessed.

How are lost profits proved in court?

This is the central issue in any damages dispute. It is also where most claims fail.

The Supreme Court of Cassation provided an essential interpretation in Interpretative Decision No. 3 of 12 December 2012 in Interpretative Case No. 3/2012 of the General Assembly of the Civil and Commercial Colleges. An award for lost profits requires certainty that the claimant's assets would have increased, rather than a mere probability.

This requirement has several practical implications.

Specific facts are needed

The court expects you to identify a specific transaction, agreement or order, an actual market or customer, and a clear economic opportunity to make a profit.

Assumptions are insufficient

Statements such as “I would have made a profit” or “I expected my business to grow” have no evidential value on their own.

A causal link must be established

You must prove that the lost opportunity resulted from the particular failure to perform and that the loss was not caused by other factors, such as market conditions, competition or internal difficulties.

Case law requires the loss to occur after the harmful conduct and to result from it. Earlier expenses or hypothetical scenarios do not meet that requirement.

Evidence must support the claim

The evidence most frequently used includes agreements with third parties, invoices and accounting documents, business plans and financial statements, and expert opinions, particularly forensic accounting reports.

In complex cases, an expert is appointed to calculate the profit that could realistically have been expected.

A common mistake is to bring a claim without an economic expert assessment or enough documents. This almost always leads to dismissal or a substantial reduction of the claim.

What are the main risks and how should a successful claim be prepared?

A claim for lost profits is both a powerful remedy and a significant litigation risk.

The following difficulties arise most often in our practice.

Overvaluing the claim

Clients often claim the maximum possible profit without allowing for costs, market risks or whether that profit could realistically have been achieved.

Lack of evidence

Without documents and expert analysis, the court cannot simply assume a profit.

Incorrect legal classification

Some cases require a combined approach involving, for example, contractual liability, a contractual penalty and lost profits.

Overlooking foreseeability

In a contractual claim, it must be shown that the losses were foreseeable when the agreement was concluded.

A successful damages claim requires a strategy from the outset. That strategy should include a legal assessment of the basis of liability, whether contractual or tortious, collection of all relevant evidence, an economic justification, an assessment of the actual loss and an evaluation of litigation costs.

You can obtain an initial indication of some costs using the legal fees calculator. Cases of this kind nevertheless require an individual assessment.

Acting promptly is particularly important. Over time, evidence is lost, witnesses become unavailable and the economic link becomes less clear.

In complex matters involving commercial contracts, construction or deliveries, proper preparation can determine the outcome of the proceedings.

Lost profits are therefore not merely hypothetical earnings. They are a legally recognised form of loss, but only where they are established with sufficient certainty, specific evidence and a causal link.

Can contractual penalties, interest and lost profits be claimed together?

A frequent practical question is whether lost profits can be combined with other forms of compensation, particularly a contractual penalty or statutory default interest. There is no universal answer. It depends on the particular structure of the agreement and the parties' conduct.

Under the Bulgarian Contracts and Obligations Act, a contractual penalty under Article 92 performs both a security function and a compensatory function. Comparable rules in German law are the provisions on contractual liability and damages in sections 280 and 286 of the BGB.

Where the penalty has been agreed as a substitute for damages, it generally excludes a claim for additional compensation, including lost profits. If the agreement provides for a fixed penalty for non-performance, the court may therefore find that the parties have already assessed the loss in advance.

There are nevertheless important exceptions.

• The agreement expressly provides that the penalty is payable in addition to damages.
• The losses significantly exceed the penalty and the penalty does not cover the actual consequences.
• The penalty is punitive rather than wholly compensatory in nature.

A common mistake is to claim lost profits without analysing the penalty clause. This can lead to a partial award limited to the penalty or to the complete dismissal of the claim for additional loss.

Interest is treated differently. Statutory default interest under Article 86 of the Contracts and Obligations Act has an independent character and is generally payable separately from damages. You may therefore claim lost profits and, at the same time, default interest on the amount due.

It is particularly important to distinguish lost profits, meaning unrealised earnings, from compensation for delay in the form of interest. They do not overlap and may exist together.

Before bringing a claim, the agreement should always be reviewed in detail. It often contains a limitation or extension of liability that changes the entire litigation strategy.

How does the injured party's conduct affect the amount of compensation?

Proving lost profits does not automatically mean that the court will award their full amount. Bulgarian law expressly takes account of the injured party's own conduct.

Under Article 83, paragraph 1 of the Contracts and Obligations Act, if non-performance is also attributable to circumstances for which the creditor is responsible, the court may reduce compensation or even release the debtor from liability.

This rule is particularly significant in lost-profit claims because the assessment of causation is more complex.

A similar principle applies in tort under Article 51, paragraph 2 of the same Act. Compensation is reduced where the injured party contributed to the damage.

In practice, the court examines whether the injured party exercised the necessary care to limit the loss. This includes taking alternative steps to minimise losses, seeking another supplier, customer or market, and avoiding unnecessary expenditure after non-performance.

If reasonable measures were not taken, part of the lost profits is often treated as resulting from the claimant's own inaction rather than directly from the breach.

A typical example is a business that loses a supplier but spends months making no attempt to find a replacement. It then claims lost profits for the entire period. The court reduces compensation because the losses could have been limited.

There is also a more subtle distinction. The applicable standard is that of a prudent trader rather than an ordinary individual. Businesses are therefore expected to act more proactively, respond promptly and make economically rational decisions.

Practical risks include remaining passive after a breach, having no evidence of efforts to mitigate the loss, and delaying legal advice.

To avoid these difficulties, every action taken after non-performance should be documented. Relevant records include correspondence with prospective counterparties, offers, refusals, negotiations, internal decisions and economic analyses.

This evidence often proves decisive for the amount ultimately awarded.

What time limits and procedural issues apply to a claim for lost profits?

Even the best prepared claim may fail if procedural deadlines are missed. This is particularly critical for lost profits because proving them takes time and delay works against the claimant.

The general limitation period for compensation claims is 5 years under Article 110 of the Contracts and Obligations Act. It starts when the loss occurs or the claim becomes due.

There is an important complication. Lost profits often arise over time. This raises questions about precisely when the right to bring proceedings arises and whether the loss is a single event or a continuing one.

In practice, where losses accumulate over time, such as lost revenue from a long-term agreement, they may be claimed as a single overall amount or in separate parts if they arose in stages.

Commercial disputes also require attention to the changing relationship between the parties. There may be settlement negotiations, partial payments or acknowledgments of the debt.

These circumstances can result in suspension or interruption of the limitation period or a change in the burden of proof.

Proceedings for lost profits are usually complex. They may involve a court-appointed accounting expert, analysis of market data and witness evidence, which has a more limited role in commercial disputes.

How the claim itself is formulated is crucial. The precise amount claimed, the period concerned and the calculation method must be clearly stated.

A poorly formulated claim can lead to partial inadmissibility, a need to amend the claim or delays in the proceedings.

A strategic choice must also be made about whether to bring only a lost-profit claim or combine it with other claims, such as a contractual penalty, performance of the obligation or rescission of the agreement.

In some cases, it is more effective to establish the breach first and then seek damages in separate proceedings.

The economic side of the dispute must also be considered. Economic loss litigation often involves substantial expenditure on experts and legal representation. An advance assessment of both the legal and financial risks is therefore essential.

If you are considering such a claim, a timely consultation with a lawyer can save time and prevent serious procedural mistakes that are difficult to correct later.