Reliance damages (law)

Reliance damages (law)

Reliance damages is the measure of compensation given to a person who suffered an economic harm for acting in reliance on a party who failed to fulfill their obligation.

cope

Reliance damages are valued by a party's reliance interest for the foreseeable amount. It puts the injured party in the same dollar position as if the contract never happened.

Application

Under contract law, in a bilateral contract two or more parties owe obligations to each other. Each party acts in reliance that the other party will fulfill their respective obligation. If one party fails to respect their obligation, then the other party or parties may suffer an economic harm. Reliance damages compensate the harmed party/ies for the amount of damages they suffered for acting in reliance on the other party's contractual obligations.

Example

Amir and Tuan formed a bilateral contract. Amir spent $100 in reliance on the contract, which was foreseeable. However, Tuan breached the contract.

Reliance damages protect a party's reliance interest. Amir spent $100 in reliance on the contract, which constituted Amir's reliance interest.

Since reliance damages equal to the value of the reliance interest of the injured party, Tuan owes Amir $100. This puts Amir in the same economic position as if the contract never happened.

ee also

*Damages
*Expectation damages
*Restitution

References


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