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The range of solutions: similarity and difference in particular cases

We saw above the detailed answers given by each jurisdiction to the 13 cases of our study, and the comparative conclusions which can be drawn for each of those cases separately. And in the earlier sections of this Part we have reflected on some of the problems of the precontractual phase which give rise to differences of approach in the different jurisdictions. We should now draw the study together with a general overview of the cases, to see where there are similarities and differences amongst the different jurisdictions’ answers, and approaches, to the cases, with a view to considering in the final section of these Conclusions some wider lessons which can be learnt from this study.

Similarities of result?

In around half of the cases there is, at first sight, at least, unanimity or near-unanimity in outcome for each of the jurisdictions. This is so for case 1 (negotiations for premises for a bookshop: all jurisdictions would award damages based on the ‘reliance’ interest); case 2 (negotiations for renewal of a lease: with one possible exception, all award a remedy, mostly damages, but sometimes special forms of remedial protection for tenants); case 6 (the ‘lock-out’, although there is far from unanimity about the variant case, the ‘lock-in’); case 9 (breakdown of negotiations to build a house for a friend: all hold that A might be liable to B for the half-built house which he now has on his land); case 10 (public bidding: almost all give a remedy where the bid was the lowest, and all refuse a remedy where the bid was not the lowest); case 12 (confidential design information: almost all would give B a remedy for A’s misuse of the information) and case 13 (misrepresentation or silence about a harvester’s capacity: all jurisdictions agree on a remedy for misrepresentation, and all but one give a remedy for silence on these facts).

These similarities are, however, often superficial. The reasoning employed by different jurisdictions can be very different, even if they appear to result in a similar remedy. And even where the remedy appears to be essentially the same, it may in fact have significant differences.

For example, in case 9 there is a consensus that A is liable to B, but some jurisdictions rest their analysis on the general principles of precontractual liability, whereas others apply their rules of unjust enrichment or the law of contract, or even (in the case of Austria and Switzerland) special legislative provisions which cover the case of

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building on another’s land. These two jurisdictions have therefore identified this sort of situation as deserving of special treatment, whereas other systems respond within their regular legal principles. But the response depends on, and can be limited by, the tools available within each legal system. In the case A has a (half-built) house on his land; and B has incurred the costs of building. Some systems have both gain-based and loss-based remedies at their disposal, and so can consider both the possibility of a claim for the disgorgement of A’s benefit (a restitutionary claim for unjust enrichment) and a claim to allow B to be compensated for the (reliance) losses he has incurred (generally a claim either in tort or for autonomous culpa in contrahendo). Some systems, however, have not developed restitutionary remedies significantly, and so are limited to claims in contract or for precontractual liability. The restricted development of the law of restitution is noted by the Norwegian and Swedish reporters. And France recognises a claim for unjust enrichment but it is a subsidiary claim, being available only if all other legal grounds are excluded; and even when it is available it does not allow A’s enrichment to be claimed if it would exceed B’s loss, a restriction which is not present in other jurisdictions, which therefore generally allow a greater freedom of choice to the claimant by way of remedies.

Even where the remedy appears to be the same, the reason for the remedy being invoked often differs amongst the jurisdictions; and the detail of the remedy (typically, the quantification of the recoverable loss) also varies. Case 1 is a good illustration of this. All jurisdictions award ‘reliance’ damages. But the reason for this award, in terms both of the category of law which applies (the cause of action), and the reason on the facts for their being an award of damages (the factual ‘trigger’ for liability), varies significantly. And there are significant differences in the quantification of the damages.

The cause of action differs in case 1 in a way which is typical of the different approaches of the systems to a range of cases of precontractual liability in this study. England, Ireland and Scotland stand apart as not recognising a general principle of precontactual responsibility: no general duty between parties negotiating a contract, so no general liability during the precontractual phase. They therefore have to look for a specific tort, breach of contract or ground of liability for unjust enrichment; and in case 1 they find it in A’s fraudulent misrepresentation (the tort of deceit in England and Ireland; the delict of fraudulent misrepresentation in Scotland). All other systems within the study have recognised that there is a place for a generalised duty between

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negotiating parties, sometimes (for reasons related to the structure of obligations within the legal system) identified as a particular illustration of a broader liability in the law of tort (such as France and Spain); sometimes developed by the courts as an independent source of obligation, often in response to the defects of the existing categories of contract, tort and unjust enrichment (such as Germany’s original development of culpa in contrahendo, as well as Austria and Switzerland); sometimes a hybrid (such as Finland, drawing on the Germanic culpa in contrahendo but placing it with the general law of tort); sometimes a specific statutory rule (such as Greece, Italy and Portugal, and, since the 2001 reforms of the Civil Code, Germany). Although there are some superficial similarities between the approaches of England, Ireland and Scotland, on the one hand, and some of the other jurisdictions on the other hand, in that liability in case 1 is based on tort, there is a fundamental difference. The language of ‘precontractual liability’, or ‘duty to negotiate [in good faith]’ is not used in the three former jurisdictions. It happens that, in case 1, A commits a recognised tort by making a fraudulent misrepresentation. In England, Ireland and Scotland, the law of tort has not been developed generally to protect the parties as against each other during precontractual negotiations, and tort will be the source of liability between negotiating parties only in cases where there is a false statement (misrepresentation), made either fraudulently (as here) or, if there was a duty to take care, negligently. This contrasts with jurisdictions such as France and Spain, where precontractual fault is recognised as a much broader concept within the law of tort allowing for the development of a generalised principle of precontractual liability. It even contrasts with jurisdictions such as Austria, Germany and Switzerland which have developed culpa in contrahendo because their law of tort cannot embrace a general principle of precontractual fault, but which do at least have a scope of recovery in tort which allows economic loss to be recovered if it is caused wilfully and contra bonos mores, which is still a more generalised principle of tortious liability for intentional harm than is accepted in England, Ireland and Scotland.

The factual ‘trigger’ for liability in case 1 also differs amongst the jurisdictions, which is more telling for our study than the different legal categorisation of causes of action. The Common Core method seeks to identify common (or different) solutions to legal problems grounded in particular facts. Here, the solution (reliance damages) appears to be a common solution. But the factual reason which is identified by the separate legal systems for this solution varies. We have already seen that England, Ireland and Scotland find A liable only

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because of his fraudulent misrepresentation. Other systems, however, have a different focus. Some use the fact that A intended to cause harm as justifying a cause of action in tort (Austria, Germany) or as demonstrating the breach of the duty to negotiate in good faith (Greece). This correlates with the fraud which is seen as significant by England, Ireland and Scotland, although as mentioned above the approach taken in these jurisdictions is narrower; it is not the fraud, but the fraudulent misrepresentation which constitutes the essential trigger. However, most jurisdictions in their analysis of the case saw A’s breach of duty arising at the very beginning, in opening negotiations in bad faith. Other reporters focused (alternatively, or cumulatively in their reasoning, to demonstrate A’s breach of duty to negotiate in good faith) on his bad faith conduct of the negotiations; or on his bad faith breaking-off. As we have noted on occasion in the conclusion to particular cases in the study, it can sometimes be difficult to see whether there are substantive differences between jurisdictions. Some reporters (as the courts in their countries might do) take a more global approach to the question of whether A was in breach of his duty to negotiate in good faith; others focus very precisely on whether the wrongdoing was comprised in A’s acts (or omissions) at the beginning of the negotiations, at particular points during the negotiations, or at the point when he broke them off. But there are certainly significant differences between jurisdictions in this respect in analysing some of the cases.

We can also see from the various reports on case 1 that the approach of the systems to apparently similar concepts and legal tests (at least, concepts and legal tests which are articulated in similar language) can be very different. A number of jurisdictions apply a test of whether the defendant’s conduct (whether in beginning, continuing or breaking off the negotiations) was contrary to good faith. But the application of this can then vary significantly. The content of the duty is apparently quite fluid in the view of some reporters,59 whereas others are very precise about the particular duties which are encompassed by the generalised duty to negotiate in good faith.60 There is not a unanimous view about whether the criteria for the assessment of good faith are objective or

59E.g. Austrian law (the ‘still-expanding judge-made doctrine of culpa in contrahendo’ makes an answer uncertain). See also the Austrian report on case 4 (difficult to confirm or deny whether a duty to inform has been violated).

60E.g. Greece; for further details, cf. the Greek report on case 3: including duties to conduct negotiations in earnest, to protect the interests of the other party, and to provide information.

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subjective.61 And, as we see in discussion of other cases, jurisdictions differ on such fundamental matters as the burden of proof of good faith.62

And when we look not just at the cause of action, or the factual trigger for the liability to pay damages in case 1, we see that the quantification of the damages can also differ significantly between the jurisdictions. This means that the actual result – the remedy – which would be obtained by B differs. Some jurisdictions are more scientific and rule-based than others in the quantification of loss; a reflection of the general approach to quantification of damages by the courts, rather than a specific response to the precontractual phase. Some reporters63 emphasise the discretion which their courts have in the calculation of damages, which therefore inevitably leads them to be rather uncertain about the actual likely award on the facts of this case. French law allows damages to cover intangible losses;64 others are reluctant to do so.65 Some focus on whether B has proved his loss in absolute terms, others allow him to recover on the basis of a proof of his lost chance.66 Some take a more rigid approach than others to proof of the causal link between A’s breach of duty and B’s recoverable loss.67 There is even a

61Cf. Greece (objective: ‘the expected sincerity . . . of a reasonable man; . . . fair and usual conduct of the relevant business’); Italy (academic views differ, but Supreme Court consistently applies objective test based on ‘fair play, reliability and co-operation between the parties’); Germany: a ‘party breaches his duty to bargain in good faith by the mere fact of entering into contractual negotiations if he starts negotiations without any reasonable chance for the opposite party to make a bargain (objective test) or without any intention at all to contract with the other party (subjective test)’.

62Cf. the Italian report on case 2 (different opinions within the Italian Supreme Court) and the Spanish report on case 2 (good faith is presumed).

63Denmark, France, Italy. Cf. also the French report on case 3 (assessment of damages is global), and the Danish report on case 9 (Danish court might award what A can afford, acting as an amiable compositeur).

64Pre´judice morale; cf. also the French report on case 11 (noting that damages to compensate pre´judice morale are awarded, but their valuation is never outwardly discussed by the courts; and speculating that pre´judice morale suffered as a consequence of an aborted contract may be indistinguishable from damages for the loss of chance to conclude the contract).

65Cf. the Greek report on case 4 (non-material damage can only be compensated in delict).

66E.g. French law (damages for the lost opportunity; but see also the possible link to pre´judice morale on the facts of case 1: above n. 64). The Scots reporters also contemplate an award of damages for loss of chance in case 1.

67The Danish reporter notes in case 10 that Danish law will not generally award damages for the loss of a chance The strict causal link is emphasised by, e.g., the German reporters in their report on case 1. For more flexible approaches, see the Norwegian report on case 6 (‘the Norwegian courts might be willing to reduce to some