Which damages are designed to reimburse costs incurred in reliance on the contract?

• A. Reliance damages
• B. Expectation damages
• C. Punitive damages
• D. Nominal damages

Answer: (A)

Reliance damages reimburse the costs you incurred because you trusted the contract. They’re meant to put you back in the position you’d be in if the contract had never been formed, covering expenditures made in anticipation of performance—like materials, design work, or other preparations. This is different from expectation damages, which aim to put you in the position you’d be in if the contract had been performed and you received the promised benefits. Punitive damages punish wrongful conduct and aren’t about compensating contract-based losses, while nominal damages are tiny awards when no actual loss is proven. So, the damages designed to reimburse those reliance costs are the reliance damages.