Diminution in Value Law and Legal Definition

Diminution in value generally refers to a reduction in the worth of something caused by an action of a third party or entity. In the context of contract law, it refers to a breach of contract causing the decrease in value of property due to the failure to construct something exactly as specified in the contract. Diminution of value studies are often used in relation to real estate valuations in situations such as studies of the impact of locating an aiport near residences. Real estate valuations and diminution in value studies are meaningful only if based upon market data.

The diminution in value theory is currently gaining strength as a major consumer concern. In tort law involving auto accidents, this theory holds that damage to an auto results in a monetary loss in the market value even though the damage has been properly repaired.

Diminution in Value (DV) is the monetary difference between:

  • A car's pre-accident value
  • A car's value after an accident and repair