Diminution In Value Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Diminution In Value, written in plain English, along with examples of how it is used.

What is Diminution In Value?

n. The decrease in property value due to a breach of contract, or failure to construct something exactly as the contract specifies.

History and Meaning of Diminution In Value

Diminution in value is a legal term which refers to the reduction in the value of property as a result of a breach of contract, negligence or wrongful act. The term was first used in the context of insurance law, where an insurer was required to compensate a policyholder for the difference between the reasonable market value of the property before and after its loss.

In the construction industry, a breach of contract or defect in construction can result in diminished value of a property, as the value of a property may be assessed based on certain features or specifications of the property, such as size, materials, or style. Where these specifications are not met, the value of the property may diminish.

Diminution in value is an important legal principle that allows for the recovery of damages in situations where the market value of the property has been diminished, as opposed to just the cost of repair.

Examples of Diminution In Value

  1. A property owner brings a claim against a contractor who failed to properly install a roof on their property, resulting in water damage and diminished value of the property.
  2. A car owner suffers an accident where their vehicle is repaired afterwards. The resale value of the car is lower than what it would have been if the vehicle had not been involved in the accident, so the car owner sues the insurance company for diminution in value.
  3. A homeowner brings a lawsuit against their neighbor for interfering with their property boundary. They assert that their right to use the property has been interfered with, and as a result, the property value has diminished.

Legal Terms Similar to Diminution In Value

  1. Liquidated Damages: A predetermined amount of money specified in a contract that the injured party can collect as compensation in the event of a breach.
  2. Restitution: Compensation awarded by a court for losses suffered as a result of a wrongful act.
  3. Devaluation: A decrease in the value of an asset, currency, or investment. This usually occurs as a result of economic factors or market trends.