Reliance Damages

Definition - What does Reliance Damages mean?

Primarily calculated in contract law, reliance damages are designed to return a party to the economic position that party would have been in if the party had not acted in reliance upon another party's failed promise or obligation.

There are typically two main causes of action to collect reliance damages: breach of contract and the doctrine of promissory estoppel.

Justipedia explains Reliance Damages

Reliance damages often become an issue between two or more parties who form a contract. In a contract, each party has obligations to each other. When a party fails their obligations to their contractual partners, their partner might suffer economic harm acting in good faith reliance that the other party will perform the obligations spelled out in the contract. In common law, courts have recognized that the parties who suffer this economic harm may sue their contractual partners for the money lost while relying on the contract.

Legally, a promise and a contract have different definitions, but failures in each relationship can produce reliance damages. A party can ask for compensation for money spent in reasonable reliance on another's promise when the promisor fails to uphold the promise.

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