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March 28, 2010

Assessment IV – Good Faith/ Culpa in Contrahendo

(Led by the suggested questions about the subject of Good Faith...)

1. Why might the judgment of the ECJ Tacconi v Wagner (C-334/00) have only limited impact for the purposes of substantive law?

The question raised by the Corte Suprema di Cassazione in the reference for a preliminary ruling of the ECJ is about the classification of an action for pre-contractual liability under the regime of Brussels I. In Tacconi v Wagner the application of either art. 5.1 or 5.3 of Brussels I determines the competent jurisdiction, either the courts for the place where the harmful event occurred or the courts for the place of performance of the obligation in question. This means that either the Italian court, that happens to be the court of the domicile of the claimant, or the German court, here also the court of the domicile of the defendant, is competent to judge in the subject matter.

For the purposes of the main proceedings, the answer to the above mentionned legal question should not be decisive for the outcome of the substantive conflict between the parties (unless the judges would apply the applicable law in a discriminative way, for example in favor of the party of their nationality) because it only determines the competent jurisdiction, but not the applicable law on the original litigation concerning the obligation to deliver the moulding plant.

2. In contrast, the reference to Rome II might be conclusive for the outcome of the conflict between Tacconi and Wagner, because Rome II determines the law applicable to non-contractual relationships. (Whereas Rome I does not play a role in Tacconi because it applies to contractual relationships). And the solution to legal problems depends on the applied law rather than on the competent jurisdiction! Article 4.1 of Rome II says that the law applicable to a non-contractual obligation arising out of a tort/delict (and the action for pre-contractual liability in Tacconi has to be qualified as such according to the preliminary ruling of the ECJ) shall be the law of the country in which the damage occurs. The applicable law would be the Italian one. But even Rome II might have a limited impact on the case, because of the similarities of Italian and German law in the area of pre-contractual liability:

"In Italian law Article 1337 of the Codice Civile contains a specific provision governing pre-contractual liability. Parties must act in good faith during negotiations over and the formation of a contract. A party who breaks off negotiations without just cause, having created an expectation that a contract will be entered into, is liable for the negative contractual interest. Fault is not required.

In German law a party who culpably breaks off negotiations without just cause or on irrelevant grounds, having created an expectation on the part of another party that a contract will certainly be entered into, is liable for the negative contractual interest. Usually the liability is based on the doctrine of culpa in contrahendo: a party who suddenly breaks of negotiations is liable for the culpable non-fulfilment of the obligation to take account of the other party's interests. Therefore, in German law almost the same criterion applies as in Italy, except that the requirement relating to fault has a role to play" (see paragraphs 59 and 60 of the Opinion of Advocate General Geelhoed in the litigation).

In contrast to the Common Law there is a doctrine of Good Faith in Civil Law systems, namely in Italian and German law that show many similarities as both derive from Roman law.

Interestingly Rome II also contains para. 30 of its preamble saying that culpa in contrahendo is to be treated as an autonomous concept and should not necessarily be interpreted within the meaning of international law.

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