Definition: Projected
Definition
The term “Projected” comes from English and literally means “projected” or “estimated.” In legal contexts, “Projected” is mainly used in relation to forecasts, estimates, and the anticipation of future developments. It refers to a forward-looking assessment of data, figures, or developments, which is made based on currently available information or models.
Areas of Use in Law
Contract Law and Negotiation
In contract law, the term “Projected” may be used to define forecasts for revenues, costs, delivery times, or performance contents. Contracting parties often list so-called Projected Figures, Projected Expenses, or Projected Timelines in agreements. Such projections serve as guidance but generally do not constitute binding assurances unless they are clearly identified as estimates.
Corporate Law and Accounting
In corporate law and accounting, the “Projected” value plays a significant role, for example in Projected Profit or Projected Revenue. Companies prepare so-called Projected Financial Statements (forecast financial statements) as part of annual accounts or evaluations for investors. These forecasts provide information on business development and are often included in due diligence reviews. A projection becomes legally relevant when it forms part of a contract or official offer, thereby potentially giving rise to liability or claims for damages.
Insolvency Law
In insolvency law, the preparation of Projected Cash Flow Statements can help assess the liquidity of a company. The legal basis here is in particular the filing for insolvency, in which the anticipated inability to pay must be evaluated. Incorrect or misleading projections can result in liability to creditors.
Procedural Law, Litigation Costs and Damage Forecasts
Projections play a role in litigation cost law and in the calculation of damages. Courts often have to decide on advances, security deposits, or damage compensation based on Projected Damages or Projected Costs. The proper determination and plausibility of these projections are essential for judicial evaluation and decision-making.
Legal Classification of Projections
Liability for “Projected” Statements
Principle
Legally, a distinction is made between a mere forecast (Projected Statement) and a binding assurance (Guarantee/Warranty). If projected values are presented as guaranteed without the necessary reservation, liability may arise from contract law warranty or damage compensation claims.
Contestation and Error
Incorrect projections may give the affected party a right to contest, for example, if incorrect data formed the basis of the contract. In particular, in cases of deception or fraudulent misrepresentation of projected values, there is a right to contest (§ 123 BGB) or a claim for damages due to pre-contractual breach of duty.
Disclosure Obligations
Especially in capital market law, there are disclosure obligations for planned or forecast business developments (Projected Earnings, Projected Turnover). Incorrect or misleading Projected information can result in criminal or administrative penalties, for example under the German Securities Trading Act (WpHG) or the Market Abuse Regulation (MAR).
Example: Prospectus Law
If Projected Figures are included in a securities prospectus, the issuer is subject to prospectus liability if the information subsequently proves to be incorrect or incomplete and investors suffer damages as a result.
Data Security and Confidentiality
Projected data, especially in the area of trade secrets (GeschGehG), are regularly subject to increased confidentiality requirements. The unauthorized disclosure of Projected Financials can result in both civil and criminal sanctions.
“Projected” as a Term in International Law
Contract Drafting in Anglo-American Legal Systems
In Common Law, “Projected” is used more broadly, including in the assessment of damage claims (“Projected Losses”), in the preparation of financial forecasts in contracts and prospectuses, and in valuing future revenues in business valuations.
Aspects of Private International Law
In international contracts, it is necessary to clarify between legal systems how projected values are handled, what burden of proof applies, and what legal consequences incorrect projections entail.
Summary
The term “Projected” describes legally relevant prognostic values that play a central role in various areas of law. The legal treatment of projected statements depends primarily on transparency, disclosure, and the agreement between the parties. Incorrect or misleading projections can result in extensive liability consequences, especially in contract, corporate, and capital market law. Careful handling of projected data is therefore of considerable importance.
Note: This article serves general informational purposes and does not replace individual legal advice.
Frequently Asked Questions
What legal requirements exist for the documentation of projected data?
The documentation of projected data is subject to strict legal requirements, particularly in regards to the traceability and completeness of data collection. Depending on the area of application, national as well as European regulations, such as the GDPR (General Data Protection Regulation) or commercial and tax law provisions, may be relevant. It must be ensured that all generated projections are documented in a manner that is traceable, so that they can be clearly assigned and reproduced in audits, for example by regulators or courts. This includes not only the actual data source, but also the algorithms, assumptions, and parameters used as the basis for the projected data. The documentation must be protected against unauthorized access and, depending on the legal area, must be retained for a certain period (for example, ten years under the German Commercial Code or Fiscal Code). Inadequate documentation can lead to disadvantages in evidence or sanctions.
Who bears legal responsibility for errors in projected data?
In principle, the responsible party who creates and uses the projected data, usually the company and its legal representatives, is liable for errors in projected data. In service relationships, for instance if external consulting firms are commissioned to prepare data, contractual liability shifts may be agreed upon. Nevertheless, ultimate responsibility remains with the organization that uses the data for relevant business decisions. If the error lies in faulty software or external models, liability may rest with the providers under product liability law or regulations on defects. If personal data is affected, fine-imposed breaches of data protection regulations may also arise. It is important for companies to implement suitable audit processes and control systems to minimize liability risks.
How does the use of projected data affect data protection and data security?
The use of projected data can have a significant impact on data protection and data security, especially if personal data is processed. According to the GDPR, projected data is to be considered personal if it allows conclusions to be drawn about individuals. In this case, various obligations must be observed, including transparent information of data subjects, performance of a data protection impact assessment (DPIA), and the implementation of technical and organizational measures to protect the data. It is essential that projections are purpose-bound so that further processing for purposes other than those originally determined may be legally problematic. Requirements regarding data minimization and storage limitation must also be observed; projected data must not be stored longer than necessary. A breach of these requirements may result not just in reputational damage, but also in substantial fines.
What legal requirements apply to cross-border processing of projected data?
For cross-border processing of projected data, international data protection law must be observed. If processing takes place within the EU/EEA, the GDPR primarily applies. However, if projected data is transferred to third countries, additional safeguards must be taken, such as the conclusion of standard data protection clauses or binding corporate rules. National regulations may also impose additional requirements, such as telecommunications secrecy or industry-specific legislation (e.g., in the financial sector). Knowledge and documentation of data flows as well as contractual arrangements with third-party providers are also relevant to minimize compliance risks. Violations of legal requirements may result in significant fines or warnings.
To what extent must data subjects be informed about the use of projected data?
The duty to inform data subjects arises primarily from data protection law. According to Articles 13 and 14 of the GDPR, data subjects must be transparently informed about which projected data is being processed, for what purpose, on what legal basis, and for how long. The categories of data subjects, such as employees, clients, or suppliers, and potential recipients must also be disclosed. In addition, data subjects must be informed about their rights (access, rectification, erasure, objection). If the projection includes automated individual decisions, an indication of the existence of such a process and the right to request a human review is required. The information must be provided in an understandable and easily accessible form, already at the time the data is collected.
What retention periods and deletion obligations apply to projected data?
The legal requirements for retention periods and deletion obligations for projected data vary depending on their intended use and legal area. In data protection law, data must be deleted as soon as the purpose of processing ceases or a data subject has effectively objected, unless longer statutory retention obligations exist. In commercial and tax law, retention periods of up to ten years may apply depending on the context of the projected data (e.g., pursuant to § 257 HGB or § 147 AO). In legal proceedings, a so-called Legal Hold order may extend the storage period further. It is recommended to regularly review obligations and implement a documented deletion policy that includes automated deletion processes and is audit-proof.
