Benefit-of-the-Bargain Rule Law and Legal Definition

Benefit of the bargain rule is a principle that any party who breaches a contract must pay the aggrieved party an amount that puts that person in the same financial position that would have resulted if the contract had been fully performed. It also refers to the principle that a defrauded buyer may recover from the seller as damages the difference between the misrepresented value of the property and the actual value received. It is one of methods of measuring damages in cases involving fraud.

The following are examples of caselaw on the rule:

Damages under the "benefit-of-the-bargain" rule for fraud by an insurer are calculated by taking the difference between the actual value of the policy and its value had the contested facts been true. [Phila. Indem. Ins. Co. v. Kohne, 181 Fed. Appx. 888 (11th Cir. Fla. 2006)]

The benefit-of-the-bargain rule provides the plaintiff with the difference between the value the plaintiff gave and the amount the defendant represented the plaintiff would receive. Oklahoma has adopted a form of the benefit-of-the-bargain rule under which a plaintiff may "recover the difference between the actual value received and the value the defrauded party would have had if it had been as represented." This measure of damages allows a plaintiff to recover for damages that were the "natural and probable result" of the fraudulent inducement. [Okland Oil Co. v. Knight, 92 Fed. Appx. 589 (10th Cir. Okla. 2003)]