Written by attorneys · grounded in primary & secondary sources — see below
An interest protected in contract remedies by reimbursing a party for losses incurred in reliance on a promise by placing that party in the position it would have occupied had the contract never been made.
Sources & Authorities
How it applies
Common Examples
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Shipowner Recovers Net Reliance Outlay
Harbor Blue Shipping spent $600,000 on engineering studies and retrofitting to prepare a vessel for a ten-year charter with OceanFresh Imports. OceanFresh repudiated the charter after learning of unfavorable freight rates. OceanFresh proved with reasonable certainty that Harbor Blue would have lost $200,000 operating the vessel over the full term. The court awards Harbor Blue $400,000 to restore it to the position it would have occupied had the charter never been made.
Contractor Receives Reduced Reliance Award
SkyFix borrowed funds and built a remote hangar after Lakeshore Regional Airlines promised higher inspection rates in exchange for the new facility and relocated technicians. Lakeshore later refused the higher rate. SkyFix seeks recovery of its outlays. The court measures damages by SkyFix's reliance expenditures less any loss Lakeshore proves with reasonable certainty SkyFix would have suffered had the modified contract been performed.
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Nurse Recovers Relocation Costs
Dana resigned her position and relocated across the country after Valley Medical Center assured her of a guaranteed three-year role in its new cardiac unit. Valley imposed a hiring freeze before Dana's start date. Dana sues to recover moving expenses and lease obligations incurred in reliance on the assurance. The court enforces the promise to the extent of her reliance losses to avoid injustice.
Publisher Seeks Recovery of Production Costs
Highland Publishing hired journalists, rented studio space, and filmed pilot episodes after Pioneer Publishing agreed to air and promote a news series. Pioneer cancelled before any episodes aired. Highland sues for its staffing, rental, and production expenditures. The court permits recovery of those reliance outlays subject to any proven loss Pioneer establishes with reasonable certainty Highland would have suffered had the series proceeded.
Subcontractor Recovers Equipment Purchases
Rivera Electric purchased specialized switchgear and declined other projects after MetroBuild Construction promised it would receive the electrical subcontract if it took those steps. MetroBuild awarded the work to a cheaper bidder. Rivera sues for its outlays and lost opportunities. The court awards reliance damages to place Rivera in the position it would have occupied had it never relied on the promise.
Airline Maintenance Firm Enforces Rate Increase
SkyFix constructed a remote hangar and relocated technicians after Lakeshore Regional Airlines promised higher inspection rates for the added commitments. Lakeshore later refused the higher rate. SkyFix sues to enforce the modified rate. The court enforces the promise to the extent necessary to protect SkyFix's reliance interest and prevent injustice.
Common questions
Frequently Asked
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How are reliance damages calculated when the breaching party proves the injured party would have suffered a loss on full performance?+
Reliance damages reimburse expenditures made in preparation for or in performance of the contract. The breaching party may reduce the award by any loss it proves with reasonable certainty the injured party would have suffered had the contract been performed. The result places the injured party in the position it would have occupied had the contract never been made.
Supporting sources
When may a promise be enforced even without bargained-for consideration?+
A promise is enforceable when the promisor should reasonably expect it to induce action or forbearance, the promisee actually relies, and enforcement is necessary to avoid injustice. The remedy is limited to the extent justice requires, typically protecting the promisee's reliance interest through reimbursement of outlays or other detrimental changes in position.
Supporting sources
Does proof of an expected net loss on full performance bar all reliance recovery?+
No. The injured party may still recover its reliance expenditures reduced by the proven expected loss. Complete denial of recovery would leave the injured party worse off than if no contract had been made, contrary to the purpose of protecting the reliance interest.
Supporting sources
What must the breaching party show to offset reliance damages with anticipated losses?+
The breaching party must prove with reasonable certainty the amount of loss the injured party would have suffered had the contract been performed. Speculative projections that fail this standard do not reduce the award.
Supporting sources
539 U.S. 558 (2003)Constitutional Law
…have declined to prohibit abortion, and others would not have prohibited it within six months (after which the most significant reliance interests would have expired). Even for persons in States other than these, the choice would not have been between abortion and childbirth, but between abortion nearby and abortion in a neighboring…