Designer Direct, Inc. v. Deforest Redevelopment Auth.

368 F.3d 751 (7th Cir. 2004)

 

RULE:

Remedies for injury to a reliance interest are defined as being reimbursed for loss caused by reliance on the contract and by being put in as good a position as a plaintiff would have been in had the contract not been made. Such damages are usually construed to include out-of-pocket expenditures incurred in preparation or performance of the contract. A plaintiff may also seek reliance damages under a theory of lost opportunity. Damages must be proven with reasonable certainty.

FACTS:

In the original action between the authority and the architects, the court reversed the district court's refusal to award reliance damages to the architects. On remand, the district court calculated reliance damages and the authority appealed. The court reversed the judgment of the district court and remanded the matter with directions to recalculate the reliance damages to the architects.

ISSUE:

Was the district court's calculation of reliance damages improper?

ANSWER:

Yes.

CONCLUSION:

The court held that the architects did not prove the existence of a lost opportunity because, while the architects showed that there was some interest from other potential clients, it failed to show that it was likely that a contract would have been entered into but for the contract with the authority. Therefore, recoverable damages were limited to those losses actually caused by the architects' reliance on the contract. Overhead costs were recoverable as reliance damages if the architects could show the expenses were properly allocated to the breached contract with the authority. While it appeared as though most of the work performed by the architects was directly related to the contract with the authority, other work was being done in other offices. The architects could not recover that portion of overhead costs that was attributable to those other projects. Thus, the district court's calculation of reliance damages was improper.

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