Legal Definitions - diminution-in-value method

The diminution-in-value method is a way of calculating damages for breach of contract. It is based on the idea that the breach has caused a reduction in market value.

For example, let's say that a contractor agrees to build a house for a homeowner. The contract specifies that the house will have four bedrooms, but the contractor only builds three. The homeowner can use the diminution-in-value method to calculate damages by determining the difference in market value between a three-bedroom house and a four-bedroom house in the same neighborhood.

Another example would be if a car dealership sells a car to a customer, but fails to disclose that the car has been in a major accident. The customer can use the diminution-in-value method to calculate damages by determining the difference in market value between a car that has been in a major accident and a car that has not.

These examples illustrate how the diminution-in-value method can be used to calculate damages in cases where the breach of contract has caused a reduction in market value.