Also known as: reliance loss damages · reliance-loss damage · reliance damages · reliance interest
Written by attorneys · grounded in primary & secondary sources — see below
A measure of contract damages that reimburses a promisee for loss caused by reliance on the contract. It places the promisee in as good a position as if the contract had not been made by compensating for expenditures made in preparation for performance or in performance.
Raphael Rivera, an electrical subcontractor, received a promise from Redwood Bank that it would award him the wiring subcontract if he declined other work and purchased specialized switchgear. Rivera turned down two jobs and bought nonreturnable equipment. When the bank awarded the subcontract to another firm, Rivera recovered his out-of-pocket costs under reliance-loss damages.
Rosa Ruiz resigned her position and signed a lease after Valley Medical Center promised her a three-year cardiac nursing role if she relocated. The hospital imposed a hiring freeze before her start date. Ruiz recovered her moving costs and lease payments as reliance-loss damages.
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Ruby Rivera, director of Lakeside Community Center, terminated its lease and hired architects after Radiance Media pledged $500,000 for a new building. The media company withdrew the pledge after the center incurred substantial planning expenses. The center recovered those expenditures as reliance-loss damages.
Ralph Richardson, owner of SkyFix maintenance, borrowed funds and built a remote hangar after Lakeshore Regional Airlines promised higher inspection rates. The airline later refused the increased rate. Richardson recovered his construction and staffing costs as reliance-loss damages.
Rhea Reynolds traveled across three states and conducted interviews after Pine Studio orally agreed to publish her investigative series. The studio refused to publish or pay. Reynolds recovered her documented travel and research expenses as reliance-loss damages.
Rowan Russell hired journalists and rented studio space after Pioneer Publishing agreed to air and promote a news series. Pioneer cancelled before airing and used some of Russell's materials. Russell recovered the salary, rent, and production expenditures as reliance-loss damages.
Reliance-loss damages reimburse expenditures made in preparation for or in performance of the contract and place the injured party in the position it would have occupied had the contract never been made. Expectation damages instead aim to give the injured party the benefit of the bargain. The Restatement permits reliance damages as an alternative when expectation damages are difficult to prove.
Supporting sources
Yes. Under the rule allowing reliance damages, the breaching party may prove with reasonable certainty any loss the injured party would have suffered had the contract been performed, and that amount reduces or eliminates the award. The offset prevents the injured party from receiving a windfall greater than its actual net loss.
Supporting sources
Reliance-loss damages are available even when the breaching party received no benefit from the injured party's expenditures. Restitution requires proof that a benefit was conferred on the breaching party. When the injured party incurred substantial sunk costs but conferred no measurable benefit, reliance damages provide the appropriate recovery.
Supporting sources
…to justify no reliance claim. Even if reliance could be claimed on that unrealistic assumption, the argument might run, any reliance interest would be de minimis . This argument would be premised on the hypothesis that reproductive planning could take virtually immediate account of any sudden restoration of state authority to…