A Framework for the Valuation of Loss of a Commercial Opportunity

Abstract

This thesis examines the valuation of loss of a commercial opportunity in a damages context. The object of the thesis is to consider the legal doctrine of loss of a commercial opportunity and to develop a general legal framework for the valuation of this type of loss, that is based on, and consistent with, the financial theory of valuation. This framework rests on the argument that, in principle, the loss of a commercial opportunity should be valued by reference to its market value, where market value is either observable or estimated theoretically. The thesis comprises three main Parts. Part one examines two things by way of introduction. First, it examines the role of financial valuation theory in the assessment of damages for economic loss in a commercial context. Secondly, it examines the legal doctrine of loss of a commercial opportunity. The object of this Part is to provide the foundation for the analysis contained in Parts two and three. Part two examines the legal principles relevant to the fact, character and valuation of loss of a commercial opportunity. The object of this Part is to analyse the legal principles and to develop a general legal framework for the valuation of this type of loss. Part three contains a case study. The case study applies the valuation framework developed in Parts one and two to the valuation of the loss of a lending opportunity, being a particular type of loss of commercial opportunity. The object of the case study is to demonstrate the utility of the valuation framework and, more generally, to demonstrate the importance of finance theory in providing a coherent and rigourous theoretical framework with which to value the loss of a commercial opportunity.