Out-Of-Pocket Rule Law and Legal Definition

Out-Of-Pocket rule is a principle that a buyer who is defrauded can recover from the seller as damages, the difference between the amount that is actually paid for the property and the actual value received. The principle states that the damages in a breach of contract or warranty case should be the difference between what was paid for the goods or services and what their actual value is.

In civil action alleging violation of § 10(b) of Securities Exchange Act (15 USCS § 78j(b)), damages recoverable are defined by "out of pocket" rule, and are difference between contract price, or price paid, and real or actual value of securities at date of sale, together with such outlays as are attributable to defendant's conduct; actual value may be calculated by looking to market price when misrepresentation or omission is cured. [Tucker v Arthur Andersen & Co. (1975, SD NY) 67 FRD 468, CCH Fed Secur L Rep P 95107, 20 FR Serv 2d 411.]