Damages are an amount of money determined by a Court or jury to reasonably compensate an injured party for the harm they have suffered. The purpose of these “compensatory damages” is to make the injured party whole. A party who has been defrauded is entitled to the recovery of any damages suffered as a result of the fraud, whether or not these damages could have been anticipated. For example, this may include money loaned to the defendant in reliance on a misrepresentation, money spent to improve a business based on the defendant’s concealment of important facts, or reasonable compensation for the time and effort spent in reliance on a misrepresentation or concealment. In short, if you suffered a loss that was caused by your reasonable reliance on defendant’s fraud, you are entitled to an amount of damages to adequately compensate you for this loss.
In cases involving fraud in the purchase, sale or exchange of property, the defrauded party is entitled to recovery of the difference between the actual value of the property given up and the actual value of what the defrauded party received. For example, if a buyer of a business is defrauded into paying $10,000 for a business that is actually worth only $3,000, the buyer is entitled to recover damages of $7,000, the difference between the actual value of what he paid and the actual value of the business. In addition, a party defrauded in the purchase, sale or exchange of property is entitled to recover damages for any amounts reasonably spent in reliance on the fraud, damages for the party’s loss of the use or enjoyment of the property, damages for lost profits or gains that might have reasonably been earned by a defrauded seller from use of the property, and damages for lost profits or gains that were reasonably anticipated by a defrauded buyer from use of the property.
Fraud is also a ground for awarding of “punitive damages”. In contrast to compensatory damages intended to make the injured party whole, the purpose of punitive damages are to punish the defendant for its conduct and to discourage similar conduct in the future. An award of punitive damages carries a very high standard, and the decision to award punitive damages is within the sole discretion of the jury. There is no set formula for a jury’s determination of the amount of a punitive damages award.
Prejudgment interest on fraud damages may also be recovered where the damages can be ascertained with certainty. In California, attorney fees incurred in bringing an action for fraud are not recoverable. However, attorney fees may be recoverable in certain fraud actions arising out of a contract (ex. business sale transactions) where the contract provides for recovery of attorney fees in disputes arising from the contract.
