this kind can only be claimed in tort provided the defendant caused them wilfully in a manner contrary to public policy.60 However, breaking off contractual negotiations, even without any good reason, will not normally satisfy such stringent conditions. Not a single relevant decision can be found.61

Here, A is liable on the ground of §§280(1), 311(2) No. 1 BGB (culpa in contrahendo). A party entering into contractual negotiations without any intention to bargain at all is in breach of his duty to bargain in good faith. If A was aware of the fact that, as an outcome of their negotiations, B would have to accept a lower price for the premises, he is liable in tort for wilfully causing damage to B in a manner contrary to public policy (§826 BGB).

Whether the claim is in culpa in contrahendo or in tort, A must put B into the position he would be without B’s mock negotiations (reliance interest). As B would have sold the premises for E1.2m if A had negotiated in good faith, A must recompense the difference between this sum and the purchase price at which B ultimately sold the premises (E1m), i.e. the sum of E0.2m.

Greece

The Greek Civil Code of 1940/46 (GCC) contains explicit provisions regarding general precontractual liability. Article 197 GCC on the responsibility arising from negotiations states that:

in the course of negotiations for the conclusion of a contract the parties shall be reciprocally bound to adopt the conduct which is dictated by good faith and business usage.

And the first paragraph of article 198 GCC states:62

a person who in the course of negotiations on the conclusion of a contract has by his own fault caused damage to the other party shall be liable for compensation even if the contract has not been concluded.

The specific nature of precontractual liability in Greece is disputed. The prevalent approach considers precontractual liability to form a

60§826:1 BGB.

61Cf. W. Lorenz in Hondius, Precontractual Liability, pp. 159–77, at p. 165.

62The second paragraph of this article provides that with regard to the prescription period one must apply the relevant provision in the law of delict by analogy (art. 937§1), which provides for a limitation period of five years from the time the injured party has knowledge of the injury.

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separate, third type of liability, alongside the other two types, namely contractual and delictual. Thus, under Greek law precontractual liability is considered to be a sui generis type of liability and this is supported by the autonomous regulation of precontractual liability in the GCC.63 Nevertheless, among those who acknowledge precontractual liability as a separate type of liability, there are still divergences: some emphasise the contractual affinity of precontractual liability (quasi-contractual),64 others stress the delictual nuances (quasidelictual),65 whereas still others stand indecisively somewhere in between.66 Since articles 197 and 198 GCC do not provide a complete liability system and many issues remain unregulated (such as the capacity of the parties, compensation of immaterial damage, liability for another’s fault, and the degree of fault required), whether the pendulum leans towards the contractual or delictual nature of precontractual liability will determine which body of law (contract or tort) fills the gaps. In legal literature the issue remains unclear but it seems that contract law is considered to be the most suitable body of law to complement the provisions on precontractual liability. Case law is of the unequivocal opinion that precontractual liability is a third source of liability, alongside the contractual and delictual, and it considers to be appropriate the application of the contractual provisions by analogy.67

According to article 197 GCC, precontractual liability arises if a party conducts negotiations in a manner that is contrary to good faith and business usage. Areios Pagos has stressed that good faith consists of, according to common understanding, the expected sincerity in the transactions of a reasonable man; whereas business usage indicates the fair and usual conduct of the relevant business with an emphasis on the obligation to inform.68

63M. Karasis in Georgiadis and Stathopoulos, Commentary on the Greek Civil Code, vol. I, p. 319.

64Pouliadis, Culpa in contrahendo und Schutz Dritter, p. 201; M. Karasis, ‘Comments on article 198 para. 2 GCC’, EEN 1976, 811, 813; Court of Appeals of Athens 5246/1998 EllD 1998, 1353.

65G. Koumandos in Georgiadis and Stathopoulos, Commentary on the Civil Code, n. 9; Court of Appeals of Athens 11518/1986 EllD1988, 916.

66Kambitsis, Precontractual Liability, p. 62ff.; D. B. Bosdas, ‘Precontractual Liability’,

Arxeion Nomologias, 1968, 337, 338.

67AP 344/1982 NoV 30, 1465; AP 756/1981 EEN 49,491; Court of Appeals of Athens 4265/ 1983 EllD 25, 819; First Instance Court of Thessaloniki 1278/1998 Arm 1998, 543.

68Particularly AP 344/1982 NoV 1982, 1465; see also Court of Appeals of Athens 5857/ 1990 EllD 1993, 1629; Court of Appeals of Thessaloniki 1136/1990 Arm 1990, 941;

Moreover, precontractual liability is based on fault (article 198 GCC). The majority of case law has invariably identified fault at the precontractual stage with behaviour which is contrary to good faith and business usage, in other words with the same premise of article 197 GCC on what constitutes unlawfulness. This view has been criticised in the legal literature as insufficiently distinguishing the unlawful behaviour from the requirement of fault; yet that issue can be traced back to the discussion on the objectivity of fault.69

Under Greek law, remedies for precontractual liability are limited to damages; specific performance70 or restitution are not awarded here. However, specific performance or restitution may be invoked on the appropriate legal bases, other than precontractual liability. For instance, a party may ask for restitution of a benefit conferred upon another party on the basis of unjust enrichment provisions. One must also note that, irrespective of whether one considers precontractual liability as being of contractual or delictual nature, the remedies would not differ, with the exception that damages for immaterial loss can be awarded only if precontractual liability is considered of delictual nature. Compensation for immaterial loss is not, however, generally recognised.

Damages in precontractual liability are limited to the reliance interest. Support for this view in the case law and legal literature derives mainly from the argument that the negotiating party cannot obtain what the contracting party would have obtained had the contract been concluded (namely the expectation interest).71 However, the reliance

Court of Appeals of Athens 5382/1988 EllD 1990, 155; Court of Appeals of Thessaloniki 550/1983 Arm 1984, 279; Court of Appeals of Thessaloniki 221/1980 Arm 1980, 792.

69G. Koumandos in Georgiadis and Stathopoulos, Commentary on the Civil Code, n. 50; M. Karasis in Georgiadis and Stathopoulos, Commentary on the Greek Civil Code, vol. I, p. 320; Pouliadis, Culpa in contrahendo und Schutz Dritter, pp. 165–7, also with extended reference to case law.

70In the legal literature there is limited support for the remedies of specific performance or compensation in natura in the case of precontractual liability; in particular, these remedies could be employed to oblige a party to fulfil the formality that impedes completion of a contract. Yet this remains an exceptional view that has not been followed by case law recognition. See Deligiannis, Legal Consultations 1960– 1966, p. 110; Kambitsis, Precontractual Liability, pp. 135–6. But see also G. Koumandos in Georgiadis and Stathopoulos, Commentary on the Civil Code, n. 80.

71For this point see the Supreme Court decisions: AP 309/1996 EllD 38, 83; AP 628/1995 NoV 45, 598; AP 1505/1988 NoV 38, 62; AP 1303/1984 EllD 1985, 402; AP 756/1981 EEN 1982, 491; Stathopoulos, General Contract Law, vol. A1, pp. 62, 63; M. Karasis in Georgiadis and Stathopoulos, Commentary on the Greek Civil Code, vol. I, pp. 320–1;

40 pr econtractual liability in european private law

interest includes not just positive (i.e. expenses) but also negative (i.e. loss of opportunity/profit) damages.72 Yet some writers argue that the provision on precontractual liability (article 198 GCC) does not draw a distinction between reliance and expectation interest but it rather requires full compensation of damage as long as the damage is causally linked to the conduct which is contrary to good faith.73 On that basis, it is generally admitted that the reliance interest may in effect be higher than the expectation interest, a claim that has found recognition in case law.74 Accordingly, in certain cases of precontractual liability it is claimed that compensation may be composed of quasi-expectation interest.75 Finally, the view has also been expressed that the expectation interest must be awarded when one party walks away from negotiations when they have been successfully concluded, the conclusion of the contract being imminent, and all that is left is the formal

Pouliadis, Culpa in contrahendo und Schutz Dritter, p. 168, n. 52; Kambitsis, Precontractual Liability, p. 124ff.

72Art. 298 GCC. With regard to the quantum and type of damages, Court of Appeals of Thessaloniki 2325/1990 Arm 1991, 14 is an exemplary case: the claimant was induced to believe that he had concluded a contract of commercial agency to represent in the Greek market the products (spirits and liquors) of a foreign producer. The latter claimed later that no contract had been concluded; meanwhile the claimant had undertaken the promotion of the products. The court found the defendant precontractually liable and awarded to the claimant the expenses he had incurred in conducting the negotiations and promoting the products, and the lost revenue of his regular occupation for the time he spent in the negotiations and promotion; but the court declined to remedy the loss of expectation interest (i.e. the loss of revenue from the commercial agency for the agreed contractual time) or any immaterial damage. The court therefore awarded both aspects of reliance interest, i.e. positive and negative damage, and turned down the claim for the compensation of the expectation interest and immaterial damage.

73G. Koumandos in Georgiadis and Stathopoulos, Commentary on the Civil Code, nn. 77–8; M. Karasis, ‘Precontractual Liability’, NoV 26, 594–5; Barbalias, ‘Precontractual Liability according to Articles 197 and 198 of the Greek Civil Code’, NoV 1974, 733, 737; Court of Appeals Thessaloniki 221/1980 Arm 1982, 792; cf. AP 1303/1984 NoV 1985, 993; Kambitsis, Precontractual Liability, p. 126.

74See Court of Appeals of Athens 2698/1978 Arm 1978, 551 (note by Kornilakis), which accepts that the reliance interest is not limited by the expectation interest. In that case it was stated that if the contract under negotiation is not concluded, then the reliance interest may in fact be higher than the expectation interest, as long as this is justified by the causal link between damage and conduct contrary to good faith. It must be noted that, unlike other provisions of the Civil Code (e.g. 145§1, 231§2 GCC), article 198 GCC does not make an explicit reference to any such limitation, and from that one may draw an additional argument against limiting the reliance interest to the quantum of the expectation interest.

75M. Karasis in Georgiadis and Stathopoulos, Commentary on the Greek Civil Code, vol. I, p. 321; also M. Karasis, ‘Precontractual Liability’, NoV 26, 594–5.

endorsement of it.76 This last point remains an exceptional view and has not been followed by the Greek courts.

Turning to the case in hand, in principle the parties are free to discontinue negotiations and the obligation to conduct them in good faith does not mean that the parties must reach an agreement. However, the parties must seriously intend to negotiate and lack of such intention indicates bad faith. A does, indeed, act in bad faith by not conducting negotiations in earnest; instead, he conducts negotiations deceptively and with the intention and knowledge of causing damage to B. Therefore, A’s behaviour contravenes the requirement of article 197 GCC that negotiations must be conducted in good faith.

Article 198 GCC provides that a person who in the course of negotiations and by his own fault causes damage to another person is liable for compensation even if the contract was not concluded. In this case a Greek court would award damages to B on the basis of the provisions of article 198 GCC as long as: (a) the damage occurred due to conduct that took place during the negotiation stage; (b) A was at fault; (c) there is a causal link between the damage and the unlawful act; and (d) B can prove all the above.77 A’s fault consists of the fact that he entered into negotiations with the sole aim of disrupting negotiations between B and C, which also amounts to conducting negotiations in bad faith. B must prove that A never entertained a serious intention to conclude a sales contract and that he only intended to cause the negotiations between B and C to fail. As a result of A’s conduct, B lost the opportunity to sell his premises for E1.2m (the offer made by C). B can seek compensation for the damage thereby caused.

Due to A’s unlawful behaviour, B loses an opportunity to sell his premises for E1.2m and he is instead forced to sell his premises for the

76Gazis, Legal Consultations 1956–1999, p. 303: ‘whenever according to due conduct by the negotiating parties the contract would be concluded but for a negation to sign the agreed document or not complying with a formality requirement, it is accepted that the non-performance constitutes the damage and expectation interest is due’ (legal consultation delivered in 1969). Further on, at p. 310, he characterises reliance interest as being a dogmatic construction, concluding at p. 318: ‘This view

[i.e. compensation of expectation interest] must be deemed to be correct irrespective of the fact that it has not until now concerned our jurisprudence. This is so because article 198 para.1 refers to restitution of damage without limiting it to the reliance interest. Whether compensation comprises the reliance or the expectation interest is a question of causal link alone’ (legal consultation delivered in 1977).

77Court of Appeals of Athens 4913/1991 EllD 1992, 881; Court of Appeals of Athens 1204/1986 EllD 1988, 913.