Legal Definitions - loss of bargain rule

The loss of bargain rule is a legal principle that applies in cases of breach of contract or contract fraud. It states that the damages awarded to the injured party should be enough to put them in the same position they would have been in if the contract had been fulfilled as promised or if the fraudulent representation had been true.

For example, if a person buys a house based on the fraudulent representation that it has a new roof, but later discovers that the roof is old and needs to be replaced, the loss of bargain rule would require the seller to compensate the buyer for the difference in value between the house with a new roof and the house with an old roof.

The loss of bargain rule is designed to ensure that parties to a contract are held accountable for their promises and that the injured party is not left worse off as a result of the breach or fraud.