Certified Professional Contract Manager (CPCM) Practice Exam

Reliance damages are designed to compensate a party for the loss suffered due to reliance on a contract that was breached. Specifically, this type of damage seeks to reimburse the injured party for investments and expenses they incurred while preparing to perform their obligations under the contract. The intent is to restore the party to the position they would have been in had the contract never been made, rather than to place them in a better position than they would have been without the contract.

In contrast, compensatory damages generally refer to compensation that addresses the actual loss suffered due to the breach, which can include direct losses and consequential losses. Punitive damages are intended to punish the breaching party for egregious misconduct and to deter others from similar actions, rather than to reimburse for incurred expenses. Special damages pertain to losses that are not a direct result of the breach but are specific to the circumstances of the injured party, often requiring special evidence to prove. Hence, reliance damages specifically focus on reimbursing prior investments and expenses, confirming the correct answer.