Contracts II

Reliance Damages


Reliance damage attempt to put the aggrieved party into the position that it would have been in if the parties had not entered into the contract.

Reliance damages compensate for expenses incurred by the aggrieved party in reliance on the existence of the contract, as well as lost opportunity costs, if provable.

While expectation damages are preferred, reliance damages may be used if there are no identifiable expectation damages or when the promise is enforced based on reliance.

Reliance
Restatement Second of Contracts § 90

Promise Reasonably Inducing Action or Forbearance

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  1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
  2. A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.

Reliance, also known as promissory estoppel, requires doing something to one's own detriment due to someone else's promise.

Such reliance must be reasonable.

Restatement Second of Contracts § 349

Damages Based on Reliance Interest

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As an alternative to the measure of damages stated in [R2C § 347], the injured party has a right to damages based on his reliance interest, including expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.