Loss in value is defined as what?

• A. The total amount of money paid to the non-breaching party.
• B. Direct damages—the gap between promised performance and what was actually received.
• C. All damages including consequential and incidental.
• D. The expected profits from the contract.

Answer: (B)

Loss in value is the reduction in the value of the promised performance caused by the breach. It’s measured by the difference between what was promised and what was actually received, i.e., direct damages. This focuses on the actual shortfall in benefit from the contract, not the total amount paid or the furthest-reaching damages.

For example, if the promised service would have produced value of 100, but what was delivered only provides value of 60, the loss in value is 40. This is a direct-damages measure and does not automatically include incidental or consequential damages, which would be treated separately. It also isn’t about expected profits.