Expectation damages and the position-if-performed measure
Expectation damages restore the plaintiff to the financial position they would have reached if the contract had been performed exactly as written. The calculation is: Position if Performed minus Actual Position. For a home renovation contract worth 100,000 dollars, if the contractor was paid 50,000 dollars upfront, breached, and the homeowner must spend 70,000 dollars to hire another contractor, expectation damages are 70,000 dollars (to get the home finished) minus the remaining balance unpaid (50,000 dollars), yielding 20,000 dollars net. The homeowner receives restitution of the prepayment plus damages for the cost overrun.
Calculating expectation damages requires certainty about what the plaintiff would have gained. If the plaintiff claims lost profit from an anticipated business opportunity, they must prove with reasonable certainty the profit would have materialized. Speculative or remote gains are excluded. Courts also reduce damages by any costs the plaintiff was able to avoid by not continuing with the breached contract.
Reliance and restitution as alternatives
Reliance damages are an alternative measure available if the plaintiff cannot calculate expectation damages with certainty. These are expenditures made in reasonable reliance on the contract that would be wasted if the contract fails. A company that orders machinery for a new product line can recover the cost of site preparation, hiring, and training if the supplier breaches. This measure does not award the expected profit, only the out-of-pocket loss.
Restitution damages prevent unjust enrichment by returning benefits conferred by the non-breaching party to the breaching party. If a buyer pays 50,000 dollars in advance for goods that are never delivered, restitution requires the seller to return the 50,000 dollars. Restitution does not award profits; it simply restores the status quo before the contract. These alternative measures allow recovery even when expectation damages are too speculative, ensuring fairness across different contract types.