Reliance Damages : Contract Law

1. Reliance Damages
   1. Rst. 2d, Sec 349 (Prof points out 349): “As an alternative to the measure of damages stated in 347 [expectation damages] 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.”
      1. Expectation damages give the profit that would have been expected under the contract, while reliance damages seek to put the plaintiff back to where they would have been had the contract NOT be signed.
         1. Why would a plaintiff go after reliance, as opposed to expectation, damages? (Prof. notes this):
            1. If P cannot calculate profits OR losses with reasonable certainty, P could ask for reliance damages to at least be put in as good a position as he would have been had the contract never come into existence.
            2. Security Stove, 1932 (Prof. points out case): D didn’t get a part to P on time; P couldn’t exhibit a stove at convention. P sued for all expenses related to the convention, including hotel stays for those who would have displayed the stove. Recognizing that expectation damages are the norm, but holding that under the peculiar circumstances that were known to the defendant transporter (that the stove was going to be in an exhibit at a convention for possible future sale) the court award the cost as reliance damages.
               1. The court is essentially saying that while P may not be able to prove that it would have been profitable had the stove been displayed, P can at least claim that it would have broken even on their investment, and should be entitled to get their investment back. (Rst. 349 allows the breaching party to submit evidence that the other side would not have broken even, but there was no such evidence in this case).
   2. UCC §2-715 – Buyer’s Incidental and Consequential Damages.
      1. Incidental damages resulting from Seller’s breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected.
      2. Consequential damages resulting from the seller’s breach include
         1. Any loss resulting from general or particular requirements and needs that the seller was told or would have reason to know
         2. Injury to person or property proximately resulting from any breach of warranty.
   3. UCC §2-710- Seller’s Incidental Damages
      1. Incidental damages to an aggrieved seller may include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care, and custody of goods after the buyer’s breach, in connection with return or resale of gods or otherwise resulting from the breach.