Edelman J

Steward J
Gleeson J
Beech-Jones J

60.

of proof this should only be in relation to "essential reliance", being partial contract
performance or necessary preparations for performance. By contrast, the Council
argued, "incidental reliance", being any other reliance which follows naturally and
foreseeably from the contract,229 should not be the subject of any facilitation of the
plaintiff's onus.

162 The concepts of essential reliance and incidental reliance were developed
by Fuller and Perdue in the course of their proposed development of the law in the
United States. As explained above, their approach is very different from that
adopted in Australian and English law. Moreover, a distinction between essential
reliance and incidental reliance is difficult and elusive. Even Fuller and Perdue's
suggested rule concerning reliance damages included both types of reliance, with
the authors acknowledging that the cases they referred to had not limited relief to
essential reliance.230 Similarly, the Restatement (Second) of Contracts231 permits
recovery of wasted expenditure based on "'incidental' reliance", giving the example
of a purchaser of a retail store who, after incurring expenditure on inventory,
suffers a loss on the resale of that inventory following the seller's repudiation of
the contract for sale of the store.

163 The Council correctly observed that, in L Albert & Son v Armstrong Rubber
Co,232 the $3,000 of expenditure that had been wasted on building a foundation for
the machines was described as a case of what Fuller and Perdue had described as
"essential reliance". But Chief Judge Learned Hand did not decide that case on the
basis of a "reliance interest" and did not suggest that the result would be different
if the $3,000 had been "incidental reliance".

164 The decision in L Albert & Son v Armstrong Rubber Co also illustrates why,
as a matter of principle, it is difficult to justify the different treatment of wasted
expenditure that is reasonably incurred as a necessary preparation for performance
of an extant contract and wasted expenditure to the extent that it is incurred

229 Fuller and Perdue, "The Reliance Interest in Contract Damages: 1" (1936) 46 Yale
Law Journal 52 at 73-74, 78.

230 Fuller and Perdue, "The Reliance Interest in Contract Damages: 1" (1936) 46 Yale
Law Journal 52 at 79; Fuller and Perdue, "The Reliance Interest in Contract
Damages: 2" (1937) 46 Yale Law Journal 373 at 374 fn 78.

231 American Law Institute, Restatement (Second) of Contracts (1981), §349,

comment a and illustration 4.

232 (1949) 178 F 2d 182 at 191.