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  • Beware of pre-contractual liability

    31. 03. 2014

    In its Sections 1728 – 1730, the New Civil Code (NCC) has expressly addressed the concept of pre-contractual liability (culpa in contrahendo). Before January 1, 2014, this type of liability only derived from case law of the Supreme Court. Newly, the legislator sets out clear terms covering the main areas of pre-contractual liability which fall under its scope in both the legal systems of other countries (France, Germany, Austria) as well as in jurisprudence, and defines rules for indemnification.

    While respecting the autonomy of will and contractual freedom, the concept of pre-contractual liability derives from the principle of fairness which requires for the parties to a contract to negotiate fairly (i.e. in keeping with general rules of common decency, without an intention to shortchange or deceive the other party or fail its legitimate expectations) and to disclose to one another fully all relevant and factual circumstances. The New Civil Code newly covers situations when a party leads negotiations without a real intent to enter into a contract or when a party refuses to sign a contract without a just reason in a situation when the signing was very likely and the other party had all reasons to expect closing.

    It follows from the above that one cannot assume that there is no liability vis a vis the other party until the contract is signed, and such assumption may not pay off in the long run.

    As already indicated, there is a good rationale behind the provisions on pre-contractual liability and the concept is in line with the overall approach of the New Civil Code which generally emphasizes fairness in legal relations (Section 6 NCC). In practice, a party which for whatever reason changes its position and refuses to close a contract may run a particular legal risk.

    Given the above considerations, it appears advisable to be prudent when communicating with business partners and to instruct employees to that effect. Communication by email, most common in business correspondence, amounts to pre-contractual negotiations, and therefore we recommend that disclaimers be attached to any business email. Disclaimers, common in the Anglo-Saxon legal practice, are short statements at the end of each email which inform the other party to what extent the communication is binding.

    As always, we are available for any additional questions you may have and we will gladly draft disclaimers suited to a concrete situation.

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