Also known as: reliance measures · reliance damages · reliance interest
Written by attorneys · grounded in primary & secondary sources — see below
A measure of contract damages that reimburses the injured party for loss caused by reliance on the contract by placing that party in as good a position as if the contract had not been made. Recovery includes expenditures made in preparation for performance or in performance. The breaching party may reduce the award by proving with reasonable certainty any loss the injured party would have suffered had the contract been performed.
Highland Publishing hired journalists, rented studio space, and filmed pilot episodes after signing a content deal with Pioneer Publishing. When Pioneer cancelled before airing, Highland sought recovery of its salary, rent, and production expenses. The court awarded those expenditures as reliance damages because they were incurred directly in preparation for performance under the agreement.
Riverside Physicians Group spent several hundred thousand dollars on lead-lined walls and specialized plumbing after signing a ten-year medical office lease with Harborview Property Fund. Harborview wrongfully terminated the lease shortly after the build-out was complete. The court permitted recovery of the build-out costs because they were reasonable expenditures made in reliance on the lease.
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Rosalind Reed purchased and smoked cigarettes for decades after seeing manufacturer advertisements that downplayed health risks. When health problems arose, she claimed damages that included medical costs incurred in reliance on those representations. The court considered whether her post-warning conduct affected the amount recoverable under a reliance theory.
East River Steamship Corp. purchased turbines from Transamerica Delaval that later failed, causing only economic loss to the ships. The company sought damages measured by its reliance on the manufacturer's representations about product quality. The court held that contract rather than tort principles governed the scope of recoverable reliance losses.
The reliance measure reimburses actual expenditures made in preparation for or performance of the contract. Expectation damages instead place the injured party in the position it would have occupied had the contract been performed. Section 349 expressly permits reliance damages as an alternative when expectation damages are difficult to prove.
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Yes. The breaching party may prove with reasonable certainty any loss the injured party would have suffered had the contract been performed. If that loss equals or exceeds the reliance expenditures, the net recovery may be reduced or eliminated entirely.
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Yes, when the expenditures are reasonable, actually incurred before the breach, and foreseeable to the landlord at the time the lease was signed. Medical office improvements such as lead-lined walls and specialized plumbing satisfy these requirements when the landlord reviewed and approved the plans.
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No. Restitution remains available for the reasonable value of services rendered or expenses incurred in reliance on an unenforceable oral agreement. Recovery is limited to the benefit conferred and does not enforce the contract itself.
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…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.