Abstract

In the face of powerful criticism, the "reliance interest" continues to hold an impactful position in judicial and academic treatment of contract damages. And yet, the theoretical foundation of reliance damages for breach of contract remains unsettled. This Article exposes the inability of the reliance scholarship to coherently explain and justify the widespread judicial practice of awarding reliance damages in lieu of expectation damages. Considering this resounding failure, the Article offers a hitherto overlooked promise-based conception of the reliance interest. Under reliance-as-promise, the right to be reimbursed for one's reasonably foreseeable performance costs is a secondary remedial right grounded in an implied contractual promise which the law attributes to every contracting party. When due to a total breach it becomes clear that the contract will not be performed, the background duty to reimburse comes into play. The Article presents and develops this promise-based account. It claims that reliance as promise can provide a more coherent normative and explanatory account of the phenomenon of awarding reliance damages for breach of contract. Apart from its explanatory force, and the normative support it can find in major contract theories, reliance as promise finds support in basic psychological insights and in the findings of a preliminary empirical study conducted by the authors.