Diminution in value is a method of calculating damages owed to a harmed party after another party breaches a contract. The damages are calculated by subtracting the market value of the object of the contract as performed from the value of the contract as promised. For example, if you enter into a contract with a developer to build a home for $1,000,000 and the developer builds a home worth $700,000, the damages calculated using diminution in value would be $300,000. Diminution in value is to be contrasted with other methods of calculating damages such as reliance damages, consequential damages, and specific performance.
[Last updated in June of 2021 by the Wex Definitions Team]