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Reliance Damages for Breach of Contract

Business and Commercial Disputes By Harvey Binnall PLLC - 2020/10/16 at 11:06am

Experienced Alexandria Business Dispute Attorney

If you were involved in a contract with another party (who ultimately breached said contract), then you may have a right to sue and recover damages as compensation for the various losses suffered.

Damages in breach of contract cases can vary quite substantially, however, depending on the circumstances.  In some cases, future profits are accessible, while in others, the damages account for the losses incurred in anticipation or preparation for the contract (reliance damages).

Reliance damages are a crucial issue in many breach of contract disputes.

Let’s take a closer look at how reliance damages work, and the compensation you might be entitled to should you pursue such damages through litigation.

How Does the Concept of Reliance Damages Work?

When the court awards reliance damages, it seeks to put the plaintiff in a position that — to some degree — reflects where they would be financially had the contract never been entered in the first place.  As such, there is no intent to compensate the plaintiff for lost profits and other potential gains from the contract.

Reliance damages include all the expenditures made by the plaintiff in anticipation of the performance of the contract (minus any costs they would have sustained as a consequence of having performed the contract).

We’ll use a quick example for clarity.

Suppose that you enter into a contract to supply 1,000 custom shirts to a company.  The company eventually breaches the contract and cancels the order at the last minute.  The cancellation occurred so late, in fact, that you already invested a great deal of time, money, and effort into purchasing the materials to make the shirts.  These costs (i.e., the value of the time spent negotiating with materials suppliers, the value of the materials purchased, etc.) must be factored into the reliance damages award.

The potential profits lost (by selling the t-shirts) would not be recoverable, however, as reliance damages do not account for speculative losses.

Contact an Alexandria Business Dispute Attorney at Harvey & Binnall, PLLC for Legal Assistance

Harvey & Binnall, PLLC is a boutique commercial litigation firm located in Alexandria, VA, but serving clients throughout the NOVA region (including parts of Maryland and the DC metropolitan area).  We have decades of experience advocating on behalf of clients in breach of contract disputes and have helped our clients recover comprehensive damages to cover their losses.

We pride ourselves on offering personalized representation to clients at every stage of the litigation process.  Our attorneys work closely with clients from start-to-finish, gaining deep insight into the nature of the dispute and how best to navigate its challenges in a way that leads to a favorable result.

If you’d like to speak to an experienced Alexandria business dispute attorney at Harvey & Binnall, PLLC, we encourage you to call 703-888-1943 or send us a message online to request a consultation.