Also known as: reliance damage · reliance interest
Written by attorneys · grounded in primary & secondary sources — see below
A measure of contract damages that reimburses the non-breaching party for loss caused by reliance on the contract. It places the injured party in as good a position as if the contract had never been made by awarding expenditures made in preparation for or in performance of the contract. Recovery is reduced by any loss the breaching party proves with reasonable certainty the injured party would have suffered had the contract been performed.
Highland Publishing hired journalists and rented studio space after signing a deal with Pioneer Publishing to produce pilot episodes. Pioneer cancelled before any episodes aired. Highland recovered its salary, rent, and production costs as reliance damages because those expenditures were made in preparation for performance.
J-Mart granted Sam a one-year dealer franchise. Sam spent money on advertising, hiring staff, and leasing premises that could not be used elsewhere. J-Mart repudiated before performance began. Sam recovered those outlays as reliance damages, subject to any proven loss J-Mart could establish with reasonable certainty.
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A buyer spent substantial sums preparing facilities to receive specialized equipment that the seller failed to deliver. The buyer recovered its preparation expenditures as reliance damages after the breach made performance impossible.
A distributor purchased supplies and hired staff in reliance on a supply contract before the manufacturer repudiated. The distributor recovered documented out-of-pocket costs incurred in reliance on the agreement as reliance damages.
A plaintiff may elect reliance damages when expectation damages are too speculative to prove with reasonable certainty. The Restatement permits this election as an alternative measure that reimburses actual expenditures made in reliance on the contract.
Supporting sources
Yes. The breaching party may prove with reasonable certainty any loss the injured party would have suffered had the contract been performed, and that amount offsets the reliance recovery.
Supporting sources
Reliance damages reimburse the injured party's own expenditures caused by reliance on the contract. Restitution restores any benefit the injured party conferred on the breaching party.
Restitution is the primary remedy in such cases, but reliance damages may also be awarded when the injured party has incurred expenses in preparation for performance.
Supporting sources
…compensate the plaintiff for loss and return him to the position he occupied before the injury. Tort damages are analogous to reliance damages, which are awarded in contract when there is particular difficulty in measuring the expectation interest.