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Usage Notes  

"In lieu of" means "instead of", with the general implication that the object of the phrase is absent or unavailable. So "I ordered onion rings in lieu of fries" if they were out of fries and you were forced to choose something else, but "I ordered onion rings instead of fries" is better if it's just your choice. "In place of" works for both, too.  

"In light of" means "as a result of", with the sense of having changed something because you observed (thus the "light", by which you see) something else. So "In light of the overwhelming shift in demand from fries to onion rings, I recommend we reduce our potato order." Or just "Let's get more onions instead of so many potatoes. Everybody hates potatoes now, apparently."  

"In favor of" means "in place of", like "instead of" but in the opposite order, with a sense of some kind of trade-off. "We reduced our potato order in favor of more onions to satisfy rampant onion-ring demand." Or "We bought more onions instead of potatoes, because everybody is ordering onion rings for some weird reason now. Did somebody on Chowhound post something good about our onion rings? Or bad about our fries?!"  
 

In light of frequent misuse, in lieu of specific needs I recommend eschewing all three in favor of saying what you know you mean.
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