§ 7.3

• Jurisdiction: Arizona

§ 7.3 Remedies for Misrepresentation and Nondisclosure

Damage measures for fraud and negligent misrepresentation differ. For fraud, Arizona, like two-thirds of the states,²¹⁰³ follows the benefit-of-the-bargain measure.²¹⁰⁴ Under this measure, the plaintiff's damages equal the difference between the property's actual value and the value the property would have had if it had been as represented.²¹⁰⁵ But the courts apply other measures if the benefit-of-the-bargain measure does not adequately compensate the plaintiff.²¹⁰⁶ The benefit-of-the-bargain measure works best in sale transactions.²¹⁰⁷ In nonsale transactions, other formulas are often needed to measure the plaintiff's loss.²¹⁰⁸

For negligent misrepresentation, out-of-pocket damages are the rule.²¹⁰⁹ Out-of-pocket damages equal the difference between the fair value of what the plaintiff received and the fair value of what the plaintiff would have received if fraud had not occurred.²¹¹⁰

Where rescission is sought on the basis of fraud, the plaintiff may recover not only the consideration that was paid but other sums needed to place him or her in the position occupied before the fraud.²¹¹¹ Disgorgement of the defendant's gain is another remedy.²¹¹²

Fraud will support the assessment of consequential²¹¹³ and punitive damages.²¹¹⁴ Emotional-distress damages are also possible.²¹¹⁵ Attorney's fees are recoverable if the fraud arises out of contract.²¹¹⁶

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Notes:

^[2103] Keeton et al., supra note 897, § 110, at 768.

^[2104] See Carrel v. Lux, 101 Ariz. 430, 436, 441, 420 P.2d 564, 570, 575 (1966); Steele v. Vanderslice, 90 Ariz. 277, 286, 367 P.2d 636, 641 (1961); Smith v. Don Sanderson Ford, Inc., 7 Ariz. App. 390, 392, 439 P.2d 837, 839 (1968) (finding no damages under the benefit-of-the-bargain measure).

^[2105] See Carrel, 101 Ariz. at 440-41, 420 P.2d at 574-75; see also Armiros v. Rohr, 243 Ariz. 606-07 ¶¶ 24-26, 416 P.3d 864, 870-71 (Ct. App. 2018) (discussing benefit-of-the-bargain damages under the UCC).

^[2106] See Ashley v. Kramer, 8 Ariz. App. 27, 30-31, 442 P.2d 564, 567-68 (1968) (permitting defrauded purchaser to recover his "aggregate out-of-pocket loss" and explaining that benefit-of-the-bargain damages "at times may be difficult to present"); Ulan v. Richtars, 8 Ariz. App. 351, 359-60, 446 P.2d 255, 263-64 (1968) ("When the benefit-of-the-bargain rule so obviously misgauges actual damage, or is completely inappropriate, it is our view that an instruction should be given in terms of pecuniary loss and proximate cause, in language broad enough to include loss of bargain, if there be evidence to support it." (footnote...