Damages in Fraud Actions

Two distinct legal theories have been developed in determining the amount of damages to be awarded in an action for fraud and deceit. The majority view is the "benefit-of-the-bargain" rule (also known as the "warranty rule"), and the minority view is known as the "tort rule" (or more commonly, the "out-of-pocket" rule). Both rules have limited use. In Hines v. Brode the California court made it clear that the two rules should be applied only where a contract is fully executed or where the plaintiff stands on his contract and has not rescinded it.

The rationale behind this holding is clear; a plaintiff who has rescinded his contract without tendering the consideration should not be placed in a more advantageous position than the plaintiff who has performed fully before bringing an action in fraud. Ohio will deny the plaintiff's suit for damages where he refuses to surrender defendant's consideration.