§23.2 Benefit of the Bargain Rule

The Case: Haynes v. Cumberland Builders, Inc., 546 S.W.2d 228 (Tenn. Ct. App. 1976).

The Basic Facts: Plaintiff alleged that he was injured as a result of defendant's fraudulent misrepresentation in a land sales transaction.

The Bottom Line:

• "In an action for damages caused by a fraudulent misrepresentation, the proper measure of the plaintiffs' general damages is the benefit of the bargain rule. Ford Motor Co. v. Lonon, [398 S.W.2d 240 (Tenn. 1966)]; Shwab v. Walters, supra; Augur v. Smith, [18 S.W. 398 (Tenn. 1891)] and Hogg v. Cardwell, 36 Tenn. 151 (1856). This measure of damages allows the plaintiff to recover the difference between the actual value of the property be received at the time of the making of the contract and the value that the property would have possessed if Appleton's representations had been true. 37 Am.Jur.2d, Fraud and Deceit, § 353, p. 473 (1968); see Shwab v. Walters, supra; 13 A.L.R.3d, Damages--Fraudulent Representation, § 3, p. 885 (1967). The application of this measure of damages compels the defendant to make good on the false representations. The measure of damages and the fixing of the value of the property are to be determined as of the time of the transaction. 37 Am.Jur.2d, § 365, p. 495 (1968); 13 A.L.R.3d, §§ 2--3, pp. 882--902 (1967); McCormick on Damages, § 122, pp. 456--457 (1935)." 546 S.W.2d at 233.
• "The plaintiff has the burden of proving both values applied in the formula which measures his general damages, the actual value of the property at the time of the contract and the value of the property if it had been as it was represented to him. In a land sale transaction, the contract price is strong evidence of what would have been the value of the land had it been as represented. 37 Am.Jur.2d, § 353, p. 476; see 13 A.L.R.3d, § 2, pp. 882--884 (1967)." Id. at 233-34.

Other Sources of Note: Rose v. City of Covington, 634 S.W.2d 268 (Tenn. 1982) (same rule applies in cases of negligent representation, and also includes "incidental" damages; "incidental" damages are not defined).