Reliance Damages

Reliance damages arise from the frustration of the creditor’s reliance on the contract. The creditor is put in the position its assets would have been in had the contract never been made.

Scope

• Costs of making the contract (negotiation, advisory, notary fees)
• Expenditure in preparing to perform (transport, storage, production preparation)
• Another contracting opportunity forgone in reliance on the contract

When Claimed

• Rescission: A creditor rescinding for default may claim its loss from the contract becoming void unless the debtor proves it was not at fault (TCO Article 125(3)); see Rescission of Contract.
• Fault in negotiations: Liability of a party that unjustly breaks off negotiations or conceals material information; see Letter of Intent.
• Mistake: A party released from a contract because of its own culpable mistake compensates the other party’s loss from the contract’s invalidity; see Defects of Consent.
• Invalid contracts: Liability of the party at fault where a contract is void, e.g. for lack of form.

Difference from Expectation Damages

Expectation damages protect the performance interest — the position had the contract been performed. Reliance damages take as reference the position had the contract never been made. As a rule, reliance damages cannot exceed expectation damages, since the creditor should not obtain more than it would have had the contract been performed.

Proof

Reliance damages are usually easier to prove, since costs can be shown by invoices and payment records. Proving a lost opportunity requires evidence of a concrete alternative offer.