Business Valuation Services: What is Economic Damage Analysis?

Business Valuation Services: What is Economic Damage Analysis

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Economic damage analysis is a broad discipline that focuses on the assessment of economic damages to a party's assets or income potential as the result of another party's actions, or lack thereof. Because the parties in economic damage cases rarely agree upon the value of the damages, a business appraiser is usually called upon to offer business valuation services in the form of economic damage analysis. Some common situations that require a business appraiser that specializes in economic damage analysis include: business interruption, intellectual property rights infringement, breach of contract, and marital dissolution that involves complex assets.

1. Business Interruption

If a party has interrupted another party's business, resulting in non-performance of services or the cessation of daily business, the first party may pursue economic damages, a move that requires the assistance of a business appraiser specializing in damage analysis. The defendant also benefits from the damage analysis in terms of damages not being assessed too high.

2. Intellectual Property Rights Infringement

Intellectual property rights infringement often involves complex consideration of the damages resulting from the infringement. For example, while the income earned from property rights infringement may be fairly obvious, the damage that the infringement causes to the intellectual property's economic prospects may not. In such instances, business valuation services focusing on economic damages are a necessity.

3. Breach of Contract

Breach of contract could result from as many situations as a business contract contains contractual duties, but the two most common breach of contract scenarios are: (1.) a party fulfills a contract using methods or materials other than those specified in the contract, or (2.) a party exits a contract without attempting to fulfill its contractual duties. In either case, business valuation services focusing on economic damages are key to assessing damage for the benefit of both parties.

4. Marital Dissolution

In most cases, divorce attorneys and/or divorce mediation experts can help spouses resolve the division of marital assets. But marital assets that feature business ownership, whether primary or through shareholding, may require the attention of economic damage analysts, particularly in states whose divorce law mandates "equitable" distribution of martial assets, of which New Jersey is one.

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