If the fraud was committed willfully and with a high degree of “moral culpability,” it is possible to recover "punitive" damages as well. Punitive damages are apart from any out-of-pocket expenses or compensatory damages, are designed to punish the wrongdoer and can amount to significant money.

What Special Rules Apply?

Since there are very powerful remedies and it is particularly harsh to be accused of fraud, the law also imposes demanding standards for alleging and proving fraud. The civil complaint in which fraud is alleged must describe the fraud in specific terms and with particularity -- for example, identifying who made the false statements, to whom, when, what the false statements were and how they were relied upon, thereby resulting in damage or change of position. It is very important, therefore, to keep careful records of any and all communications during the negotiation of a transaction, especially those that contain important information that is relied upon to enter into the transaction.

In addition, the party relying upon the false statements cannot just blindly accept whatever was conveyed to it -- it must act reasonably under the circumstances to protect itself. So if a reasonable person would have known better than to believe the false statement, or there were reasonable means to detect the truth, the party alleging fraud will not be allowed any remedies. If statements are made, it is essential, therefore, to verify them, check all independent sources, and to act diligently to protect yourself.