Reliance damages reimburse the plaintiff for any costs – monetary or otherwise – that plaintiff incurred in preparing to perform or performing her part of the contract.  They are sometimes called out-of-pocket damages.  An award of reliance damages puts the plaintiff in the position she would have been in had she never contracted with the defendant.

It is generally established that where there is a breach of a valid contract, the injured party may seek reliance expenses or losses as an alternative to expectancy damages.[1]  Reliance damages include “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.”[2]  However, recovery under reliance damages theory may not exceed the full contract price.[3]  Further, reliance damages may not exceed what would be awarded as expectancy damages.[4]  Recovery for reliance loss is based on net reliance loss; therefore, any benefit the injured party gains in reliance is credited to the defendant’s liability.[5]

Although Nevada law on reliance damages is limited, Perry v. Jordan,[6]  provides some insight.  The breaching party sold her clothing store to plaintiff and entered into a management contract whereby breaching party agreed to continue managing the clothing store for one year, train her replacement, and receive a salary of $5,000 per month.[7]  After six months, the breaching party abandoned the store, leaving the plaintiff to operate at a loss and eventually close the store.[8]  Plaintiff requested and the Court awarded reliance damages along with the return of the $5,000 per month received by the breaching party.[9]

 

[1] See Dobbs, § 12.2(1) at 50; Restatement (Second) of Contracts § 349.

[2] Restatement (Second) of Contracts § 349.

[3] Id. at cmt. a.

[4] See Dobbs, supra, § 12.2(2) at 56.

[5] Id.

[6] Perry v. Jordan, 111 Nev. 943, 900 P.2d 335 (1995).

[7] Id. at 337.

[8] Id.

[9] Id. at 338.