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#contract #law #remedies
In a seminal article, Fuller and Perdue (Lon L Fuller and William Perdue, 'The Reliance Interest in Contract Damages' (1936) 46 Yale Law Journal 52 and 373), highlighted the two principal compensatory objectives for an award of damages. One measure protects the innocent party's so-called 'reliance' interest, covering their out-of-pocket expenses. It follows that, where a party's reliance interest is properly compensated, they are in the same position post-breach as they were pre-contract; the breach notwithstanding, they are no worse off. The alternative measure protects the innocent party's so-called 'expectation' interest. This measure aims to cover the innocent party's loss of profit; in other words, the aim is to put the innocent party in the same position post-breach that they should have been in had the contract been performed. In commercial dealing, where profit is the point of the exercise, it is particularly important that the expectation interest is protected; and this is indeed the default measure in the general law of contract.
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