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A nondefaulting party may be willing to forego recovery of his "expectation interest" and instead seek only to recover his "reliance interest". The courts, therefore, allow recovery of preparation and part performance expenditures as an alternate measure of damages if this is what the non-defaulting party seeks, i.e., the party may recover these expenditures without also seeking his expected net profits.
Appellant franchisee purchased a franchise from appellee franchisor for a 15-year term. Appellant operated under the franchise for 1 year. Appellant alleged that appellee's material breaches terminated the agreement. Appellant sought the return of the franchise fee and cost of equipment. The trial court granted appellee a directed verdict and dismissed appellant's action.
Did the trial court err in granting appellee a directed verdict and in dismissing appellant's action?
The court found that appellant sought to protect his "restitutionary interest," but the pleadings appeared to demand "reliance interest." The court held that the trial court's directed verdict for appellee was predicated solely upon a consideration of the evidence as it related to proof of "lost profits" or "diminished value." The court reversed and held that appellant was not limited to proving lost profits. The court remanded with directions to grant a new trial and to permit appellant to amend his pleadings to conform to the evidence and the actual relief sought.