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How Detrimental Reliance Allows for Recovery Without a Contract

Litigation By Harvey Binnall PLLC - 2020/11/30 at 11:59am

Get the Help You Need from an Alexandria Business Attorney

If you were engaged in a pseudo-contract with another party when they “backed out” of the agreement and caused you to suffer losses, you may be concerned that you have no options for recovery.  After all, the other party is likely to argue that there was no actual contract, and as such, they are not liable for damages.

Fortunately, plaintiffs do have a path to recovery through the legal principle of detrimental reliance.  How does it work?  Let’s take a closer look.

Detrimental Reliance Basics

Our Alexandria business attorney knows that there are many situations in which a valid contract has not been technically formed.  For example, you could ostensibly have been told by a hiring manager to prepare to join a company, as they’re just finishing up the paperwork for your hiring.  Even though you haven’t signed the employment papers, if the representations are sufficiently clear, then it may be reasonable for you to rely on those representations — say, by moving into the city to live closer to your new job.

This is known as “detrimental reliance.”  If the company decides not to move forward with the hiring, then you could arguably sue and recover damages for the move-in costs, and potentially even for other losses (i.e., the lost wages from not taking a different job that was offered to you).

Regardless of the state jurisdiction, plaintiffs can take advantage of detrimental reliance principles to secure compensation in cases where a valid contract does not exist, but where they relied on another party’s “promise.”

Detrimental reliance has a number of elements that must be satisfied, however.  It is not necessarily a simple matter to prove detrimental reliance.

Successful litigating a detrimental reliance claim requires that: a) a promise was made on which you “reasonably” relied (under the circumstances), and b) you sustained losses as a result.

In many cases, a detrimental reliance claim is won or lost on the basis of whether the promise was “reasonably” relied upon.  What constitutes “reasonable” reliance depends on the overall circumstances.

For example, suppose that your neighbor tells you that if they ever “get bored” of woodworking, you can take all their advanced tools for free.  If they never give you the toolset, it would be very unlikely for you to win a lawsuit — after all, the court would not see that statement made by your neighbor as a promise, given that it is conditional and vague about that condition.  As such, the promise could not be “reasonably relied” upon.

Let Our Alexandria Business Attorney Help You With Your Situation

If you’ve been involved in a contract-related dispute and would like guidance on how to proceed with litigation, it’s important that you get in touch with a qualified Alexandria business attorney as soon as possible.  As with other civil lawsuits, there is a statute of limitations deadline by which you must bring an action — as such, it’s important that you seek legal assistance as early as possible.