CACI No. 361. Reliance Damages

Judicial Council of California Civil Jury Instructions (2023 edition)

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361.Reliance Damages
If you decide that [name of defendant] breached the contract, [name of
plaintiff] may recover the reasonable amount of money that
[he/she/nonbinary pronoun/it] spent in preparing for contract
performance. These amounts are called “reliance damages.” [Name of
plaintiff] must prove the amount that [he/she/nonbinary pronoun/it] was
induced to spend in reliance on the contract.
If [name of plaintiff] proves reliance damages, [name of defendant] may
avoid paying [some/ [or] all] of those damages by proving [include one or
both of the following]:
[1. That [some/ [or] all] of the money that [name of plaintiff] spent in
reliance was unnecessary;]
[1. [or]
[2. That [name of plaintiff] would have suffered a loss even if [name of
defendant] had fully performed [his/her/nonbinary pronoun/its]
obligations under the contract].
New December 2015
Sources and Authority
“One proper ‘measure of damages for breach of contract is the amount expended
[by the nonbreaching party] on the faith of the contract.’ (Agam v. Gavra
(2015) 236 Cal.App.4th 91, 105 [186 Cal.Rptr.3d 295].)
“Where, without fault on his part, one party to a contract who is willing to
perform it is prevented from doing so by the other party, the primary measure of
damages is the amount of his loss, which may consist of his reasonable outlay or
expenditure toward performance, and the anticipated profits which he would
have derived from performance.” (Buxbom v. Smith (1944) 23 Cal.2d 535, 541
[145 P.2d 305].)
“This measure of damages often is referred to as ‘reliance damages.’ It has been
held to apply where, as here, ‘one party to an established business association
fails and refuses to carry out the terms of the agreement, and thereby deprives
the other party of the opportunity to make good in the business . . . .’ (Agam,
supra, 236 Cal.App.4th at p. 105, internal citations omitted.)
“The lost earnings found by the jury constituted harm flowing not from the
breach of any contract but from plaintiff’s entry into the contract in the
expectation of receiving the promised options. Such ‘reliance’ damages may
sometimes be recovered on a contract claim ‘[a]s an alternative’ to expectation
damages.” (Ryan v. Crown Castle NG Networks, Inc. (2016) 6 Cal.App.5th 775,
788 [211 Cal.Rptr.3d 743], original italics.)
“[I]n the context of reliance damages, the plaintiff bears the burden to establish
the amount he or she expended in reliance on the contract. The burden then
shifts to the defendant to show (1) the amount of plaintiff’s expenses that were
unnecessary and/or (2) how much the plaintiff would have lost had the defendant
fully performed (i.e., absent the breach). The plaintiff’s recovery must be
reduced by those amounts.” (Agam, supra, 236 Cal.App.4th at p. 107, internal
citation omitted.)
“Concerning reliance damages, Restatement [Second of Contracts] section 349
provides as follows: ‘As an alternative to the measure of damages stated in
[Restatement section] 347, the injured party has a right to damages based on his
reliance interest, including 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.’ (US Ecology, Inc. v. State of California (2005) 129 Cal.App.4th
887, 907 [28 Cal.Rptr.3d 894], original italics.)
Secondary Sources
1 Witkin, Summary of California Law (11th ed. 2017) Contracts, § 894 et seq.
15 California Forms of Pleading and Practice, Ch. 177, Damages, § 177.79
(Matthew Bender)
6 California Points and Authorities, Ch. 65, Damages: Contract, § 65.21 et seq.
(Matthew Bender)
Matthew Bender Practice Guide: California Contract Litigation, Ch. 7, Seeking or
Opposing Damages in Contract Actions, 7.15
362-369. Reserved for Future Use

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