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reliance damages

Reliance damages refer to the monetary compensation awarded to a party (promisee ) that suffered damages from relying on a reasonable promise of the other party (promisor ) that broke the promise. The concept of reliance damages is mostly used in contract law . Courts generally calculate reliance damages by assessing what amount of compensation would make the injured party whole (e.g.: How much would the party make provided that the other party kept their part of the promise?). Typically, the court awards reliance damages in either a breach of contract claims or promissory estoppel . The court may award damages for expected future profits in some cases. On the other hand, courts also may award damages for the plaintiff’s lost expenses in anticipation of the fulfillment of the contract.

In Chicago Coliseum Club v. Dempsey, 265 Ill. App. 542 (1932) , the parties agreed on a contract for a boxing match. However, a month before the set date for the boxing match, the defendant sent a message to the plaintiff that there was no contract to begin with and thus there would be no boxing match. The plaintiff argued for a breach of contract and moved for reliance damages. The court initially found that there was a valid contract. Nevertheless, the court determined that the damages the plaintiff suffered were too speculative and could not be assigned an objective amount of compensation to be awarded reliance damages. Furthermore, the plaintiff kept making expenditures even after the defendant informed about not going through with the boxing match. Thus, the court decided that not all the expenses incurred by the plaintiff were recoverable. However, the court did award the plaintiff $300 that they paid the architect to prepare for the boxing match in the stadium, which were expenses reasonably relied on the defendant’s promise and were objectively determinable.

See also: Walters v. Marathon Oil Co. , Curran v. Barefoot , Sullivan v. O’Connor .

[Last reviewed in April of 2024 by the Wex Definitions Team
]

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