A software developer entered into an oral agreement with a non-profit organization to create a custom app tailored to improve their donation tracking process. The developer began work immediately, purchasing specialized software tools and dedicating significant time to developing the app. After several months, the non-profit organization canceled the project, citing budgetary concerns. The organization had not made any payments, but the developer had already delivered an initial prototype and had incurred significant expenses. What theory of recovery is most applicable for the developer to pursue compensation for their efforts?
Liquidated damages to recover a previously agreed-upon amount for breach of contract.
Reliance damages to recover costs incurred during the development of the prototype and other preparations.
Expectation damages to recover the profits the developer expected from the project.
Restitution damages to recover the value of the prototype created for the non-profit organization.
The correct answer is reliance. When a party incurs expenses or suffers losses by relying on a promise or agreement, even if no enforceable contract exists, they may be awarded damages based on reliance. This compensates the party for costs incurred during their efforts. Restitution, while closely related, primarily focuses on recovering the value of benefits conferred to the other party, not the costs expended.
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