A Deterrence Perspective on Damages for Fraudulent Misrepresentation

Abstract

The purposes of this paper are twofold. First, it provides a theoretical framework for understanding the deterrence function of damages as a private legal remedy for fraudulent misrepresentation, explains, from an economic perspective, why fraudulent misrepresentation is socially undesirable, and then shows how the damages rule can be used as a deterrence instrument. Second, it conducts a brief analysis of the deterrence of fraudulent misrepresentation in English tort law and argues that, despite some imperfections, damages in tort law can provide a valuable complement to some traditional deterrence sanctions to fraud such as criminal law and regulation.