November 20, 2011

Pre–contractual negotiations (Ius Commune ch. 9)

This weeks reading is about the role of good faith in pre-contractual negotiations.

The combination of the words „good faith“ and „pre-contractual“ immediately triggers the association of culpa in contrahendo in a german law students mind. However, I learned that the c.i.c does not only comprise situations where there is a claim for personal damages in question, but also the obligation to negotiate in good faith. More precisely, there can even be situations when it is contrary to good faith to end negotiations.

While I can understand that it is important for a party to rely on the other's sincerity, my first reflex was to ask for the implications this has on contractual liberty (Vertragsfreiheit).

Why should it be against good faith to end negotiations? The point of negotiations is for the parties to find an agreement. However, if one party does not feel confident that there will be an agreement, contractual liberty allows to stop negotiations and look for better deals elsewhere. It seems that this was a misconception, taking the meaning of good faith too far. The authors explain on p. 381 that good faith in pre-contractual negotiations does not amount to what could be conceived as a “Kontrahierungszwang”. This would be contrary to a free economy.

The role of good faith is therefore to protect the party which is led to believe that there will be a subsequent contract in the future.

Also, it was interesting to see that although there is no general duty of good faith in common law, the outcomes are not very different. Other doctrines, like the doctrine of fraud, fulfill the same role.

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