---
name: dispute-quantification-framework
description: "Structures the financial quantification of a commercial dispute by framing the core damages questions, selecting appropriate methodologies (lost profits, unjust enrichment, diminution of value, reasonable royalty, restitution), specifying the data and documents required, and outlining a defensible quantification approach with sensitivity ranges. Use when assessing the financial exposure or recovery value of a claim, preparing for litigation or settlement, scoping a forensic accounting engagement, or pressure-testing an opposing expert's damages model."
argument-hint: "[dispute-type] [claim-facts]"
allowed-tools: ["Read"]
---

# Dispute Quantification Framework

## Purpose
Convert the facts of a commercial dispute into a structured financial quantification plan — naming the right damages methodologies, isolating the questions that drive the number, flagging the data and documents needed to support it, and outlining a defensible approach with ranges. Solves the early-stage problem of leaders needing a credible exposure or recovery estimate and a forensic work plan before committing to expert spend or a settlement position.

## When to Use
Invoke this skill when the user asks to:
- Estimate the financial exposure or recovery value of a commercial claim
- Decide which damages theory applies (lost profits vs. unjust enrichment vs. diminution of value)
- Scope a forensic accounting or damages-expert engagement before retaining one
- Prepare a quantification position for mediation, settlement, or litigation
- Pressure-test or rebut an opposing party's damages model
- Build a defensible loss calculation for a breach, fraud, IP infringement, or M&A dispute

## Inputs Required
Before starting, collect:
- **Dispute type**: Breach of contract / fraud / IP infringement / M&A or earnout / partnership / professional negligence / other
- **Claim facts**: 4–8 sentence narrative of what happened, who did what, and the alleged wrong
- **Wrongful act and date**: The specific conduct and the "but-for" event date that triggers the loss period
- **Affected revenue/asset**: The business line, product, contract, asset, or relationship financially impacted
- **Side**: Whether quantifying as claimant (recovery) or respondent (exposure/rebuttal)
- **Available data**: What financial records, contracts, forecasts, and comparables currently exist
- **Loss period**: Start and end (or projected end) of the period over which harm accrued

If side is not stated, default to claimant perspective and flag the assumption. If the loss period end is uncertain, model both a discrete cutoff and a perpetuity/terminal-value scenario.

## Instructions

### Step 1: Frame the Core Quantification Questions
Before selecting a method, fix the questions every credible damages analysis must answer:
- **The but-for world**: What financial position would the claimant be in absent the wrongful act?
- **The actual world**: What financial position did the claimant actually experience?
- **Causation link**: Which portion of the gap is attributable to the wrong vs. market, management, or other intervening causes?
- **Loss period boundaries**: When does the harm start (wrongful act / discovery) and when does it end (cure, mitigation, contract term, useful life)?
- **Mitigation**: What did or could the claimant reasonably do to reduce the loss?

State each question explicitly for this dispute — do not leave them abstract.

### Step 2: Select the Damages Methodology
Match the facts to one or more recognized methods. Name the primary method and any alternative or cross-check method.

**Lost Profits**
Best when the wrong reduced the claimant's revenue or increased its costs on an ongoing operation with a track record.
- Build: But-for revenue − actual revenue = lost revenue; then apply incremental (avoidable) cost margin, not gross margin
- Requires: historical financials, a credible but-for revenue projection, and a defensible incremental cost ratio
- Watch: use incremental costs only; avoid double-counting fixed costs already incurred

**Unjust Enrichment / Disgorgement**
Best when the focus is the defendant's gain rather than the claimant's loss (fraud, breach of fiduciary duty, misappropriation).
- Build: Quantify the profit, savings, or benefit the defendant obtained from the wrongful act
- Requires: defendant's financial records, cost-of-acquisition data, apportionment between wrongful and lawful contributions
- Watch: apportion gains attributable to the defendant's own legitimate effort

**Diminution of Value**
Best when an asset, business, or equity stake permanently lost value (M&A disputes, warranty breaches, impairment).
- Build: Value with the misrepresentation/breach vs. value as warranted; use income, market, or asset approach
- Requires: valuation date, multiples or comparables, normalized cash flows, discount rate
- Watch: anchor to the proper valuation date — usually the transaction or breach date

**Reasonable Royalty / Hypothetical License**
Best for IP infringement or unauthorized use where lost profits are hard to prove.
- Build: Hypothetical negotiation royalty rate × infringing revenue base
- Requires: comparable license agreements, royalty benchmarks, revenue attributable to the infringed asset

**Restitution / Cost-to-Cure / Out-of-Pocket**
Best when the remedy is returning consideration paid or the cost to fix the harm.
- Build: Amounts paid in reliance, or the reasonable cost to remediate
- Requires: payment records, repair/replacement quotes

### Step 3: Specify the Data and Document Requirements
For the chosen method(s), list the exact evidence needed, organized so it can become a document request or expert checklist:
- **Financial records**: Audited statements, monthly P&Ls, GL detail, tax returns (specify years and loss period)
- **Forecasts and budgets**: Board decks, projections, models that predate the wrongful act (these anchor the but-for world)
- **Contracts and pricing**: The agreement at issue, pricing schedules, comparable contracts, license agreements
- **Operational data**: Volume, unit economics, customer/churn data, capacity constraints
- **Market and comparables**: Industry growth rates, peer performance, comparable transactions or royalty rates
- **Mitigation evidence**: Steps taken to replace lost business or reduce harm
For each item, flag whether it is **likely available**, **must be requested in discovery**, or **must be reconstructed/estimated**.

### Step 4: Outline the Quantification Approach
Lay out the calculation as a sequence the analyst (or retained expert) can execute:
1. Define the loss period and valuation/projection dates
2. Construct the but-for scenario (with stated growth, margin, and discount-rate assumptions)
3. Construct the actual scenario from observed results
4. Compute the gross gap, then adjust for causation, mitigation, and apportionment
5. Apply present-value discounting to future losses; address pre-judgment interest separately
6. Reconcile the result against the alternative/cross-check method

### Step 5: Build the Sensitivity Range and Vulnerabilities
- Identify the 2–3 assumptions that move the number most (growth rate, discount rate, margin, royalty rate, attribution %)
- Provide a low / base / high range driven by those assumptions — not a single false-precision figure
- Flag the weakest points an opposing expert will attack and how to shore them up
- Note any legal-causation or remoteness issues that could disqualify a category of loss (route through counsel)

## Output Format
- **Structure**: Five labeled sections in sequence, with the methodology section presenting the selected method(s) and a stated reason for selection
- **Length**: 1,000–1,400 words
- **Format**: Structured document — prose framing, bulleted data requirements, numbered calculation steps, and a low/base/high range table or labeled bullets
- **Sections**: Core Quantification Questions → Selected Methodology (with rationale) → Data & Document Requirements → Quantification Approach → Sensitivity Range & Vulnerabilities
- **Tone**: Forensic and measured — the voice of a damages director scoping a defensible engagement; precise about assumptions, candid about weaknesses, no advocacy spin

## Quality Checklist
Before delivering output, verify:
- [ ] The but-for world and actual world are each defined specifically for this dispute, not generically
- [ ] A primary methodology is named with a stated reason, plus at least one cross-check method
- [ ] Lost-profit calculations specify incremental (not gross) costs where that method is used
- [ ] Every data requirement is tagged as available / discoverable / must-be-reconstructed
- [ ] The output gives a low/base/high range, not a single unsupported number
- [ ] At least two specific vulnerabilities an opposing expert would attack are flagged
- [ ] Causation, mitigation, and apportionment are each addressed explicitly

## Notes
- This framework scopes and structures the analysis; the resulting calculation should be executed or validated by a retained expert before it is relied upon in proceedings.
- Causation and remoteness are legal questions — flag them for counsel rather than resolving them in the financial model.
- The single most common error in opposing damages models is using gross margin instead of incremental margin in lost-profit claims; check this first when rebutting.
- Forecasts and budgets created before the dispute arose are the strongest evidence for the but-for world — prioritize locating them early.
- When the loss extends indefinitely, separate the discrete-period calculation from any terminal-value or perpetuity assumption, since the latter draws the most scrutiny.

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## How to use this skill

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