Reliance loss refers to the financial losses a claimant experiences due to expenses incurred while preparing for or partially performing a contract. This type of loss aims to restore the claimant to the position they would have been in had the contract not been made. Reliance loss is also known as wasted expenditure loss.
Reliance loss is primarily used in contract law, particularly in civil cases. It arises when one party to a contract fails to fulfill their obligations, leading the other party to incur costs based on their reliance on the contract being completed. Claimants may seek damages through lawsuits to recover these losses. Users can manage some aspects of this process with legal templates available from US Legal Forms, which are designed by qualified attorneys.
Here are a couple of examples of abatement:
Example 1: A contractor begins work on a home renovation after signing a contract with the homeowner. The homeowner later cancels the contract, and the contractor has already purchased materials and hired labor. The contractor can claim reliance loss for the expenses incurred.
Example 2: A business invests in marketing and promotional materials based on a contract with a supplier that later fails to deliver. The business can seek damages for the costs of the marketing efforts that relied on the supplier's commitment. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Key Differences |
|---|---|
| California | Reliance loss claims must be clearly documented with evidence of incurred expenses. |
| New York | Courts may require proof of the reasonableness of expenses to award reliance damages. |
| Texas | Reliance loss claims can be affected by the statute of limitations for contract disputes. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Key Differences |
|---|---|---|
| Expectation Damages | Compensation for what the claimant expected to receive from the contract. | Focuses on the benefits lost rather than expenses incurred. |
| Consequential Damages | Losses that occur as a consequence of the breach, beyond direct losses. | Includes indirect losses, while reliance loss focuses on direct expenditures. |
If you believe you have incurred reliance loss due to a contract breach, consider the following steps:
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Reliance loss refers to the financial losses incurred by a claimant due to expenses made in reliance on a contract that was not fully performed.