CACI 361 Reliance Damages

California Civil Jury Instructions CACI

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;]


[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].

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