Opinion ID: 2427974
Heading Depth: 1
Heading Rank: 1

Heading: fraud in the inducement versus breach of contract

Text: In this case the Court holds that a party may recover tort damages for fraudulent inducement irrespective of whether the fraudulent representations are later subsumed in a contract or whether the party only suffers an economic loss related to the contract's subject matter. To allow recovery of tort fraud damages only when a plaintiff suffers an injury distinct from the economic losses recoverable under a breach of contract claim is inconsistent with this well established law. To so limit the recovery ignores the fact that an independent legal duty, separate from the contract's existence, precludes the use of fraud to induce a binding agreement. 960 S.W.2d at 47. The Court acknowledges that Texas recognizes two measures of direct damages for common-law fraud: (1) the out-of-pocket measure and the (2) benefit-of-the-bargain measure. See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817 (Tex.1997); W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d 127, 128 (Tex.1988). The Court recognizes that the out-of-pocket measure is the difference between the value paid and the value received while the benefit of the bargain measure is the difference between the value as represented and the value received. See Arthur Andersen, 945 S.W.2d at 817; Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 373 (Tex.1984). The Court states that the out-of-pocket measure allows the injured party to recover the actual injury suffered measured by the difference between the value of that with which he has parted with, and the value of that which he received. See Arthur Andersen, 945 S.W.2d at 817. The Court also concludes that while the benefit-of-the-bargain measure can include lost profits, it only compensates for the profits that would have been made if the bargain had been performed as promised. Despite recognizing that fraudulent inducement to enter a contract is a breach of an independent legal duty separate from the contract itself, the Court calculates both measures of damages based on Presidio's damages as if the contract made had been performed as promised.