70 pr econtractual liability in european private law

the prescribed notice to terminate the tenancy, he can only resist the grant of a new tenancy (if the tenant applies to the court for it) if he can establish one of a list of grounds set out in the Act for obtaining possession. None of the grounds for possession appears to be established here: they include such things as serious breaches of tenancy obligations by the tenant; or that the landlord requires possession of the premises either to demolish or reconstruct them, or to occupy them himself.

However, on the facts given, B appears to have surrendered his tenancy of the warehouse, since he has moved out and now made alternative arrangements. Even if he had ceased to occupy the warehouse for business purposes after the end of the lease, he could still have exercised his right under the Act to a new lease.18 But once the tenancy has been surrendered, such as by delivering possession up to the landlord, this remedy is no longer available.19

Finland

A may be liable to B for damages under the rules of culpa in contrahendo. The provisions of tenancy law applicable to the agreement between A and B20 are not relevant for the assessment of A’s acts in connection with the termination of the contract and the negotiations for a new agreement with B. Nor do damages provisions of the relevant Act contain any special elements in addition to the ordinary contract law rules.

A’s and B’s negotiations are to be considered as a precontractual situation rather than a contractual one. However, the existing contractual relationship between them must perhaps be taken into account to some extent. It accentuates their close relationship and makes a difference not only from common tort situations but also from ordinary contract negotiations between parties having no existing contract between them. But this special feature is not in itself sufficient to change the applicable damages standard to the contractual positive interest. Otherwise, the idea of a fixed-term contract would be rendered nugatory, and the tenant would in any case be entitled to continue the

18 Landlord and Tenant Act 1954, s. 24(3). 19 Ibid. s. 24(2).

20There are three separate acts, Tenancy Act (Huoneenvuokralaki) and Act on Ground Rent (Maanvuokralaki) concerning respectively house tenancies and tenancies of land to private persons, and Act on the Lease of Business Premises (Laki liikehuoneiston vuokrauksesta). The last of these governs the agreement between A and B. In fixedterm contracts the Act does not restrict the right of the landlord to terminate the contract at the end of the contract period.

lease (or to be put in an equivalent economic position). The contract law elements have to gain in weight from the special circumstances in this case, but this must be achieved by some other means than the application of the positive interest. As commonly in culpa in contrahendo situations, costs and other economic losses should in principle be recoverable, and in addition the burden of proof of fault might be placed on the defendant.21

The crucial question for imposing liability on A concerns the possible elements of fault in his behaviour. The prevailing principle is freedom of contract negotiations, including freedom to break off negotiations with no need to give good reasons and without incurring liability to the other party.22 On the other hand, there are commonly accepted limits to this freedom.

It is possible for a party’s withdrawal from negotiations to give rise to liability. In Finnish discussions on culpa in contrahendo, views have been offered that freedom of negotiations should reach its utmost limit where the reliance of a party on the conclusion of the contract has become worth protecting. This point should be reached only in extreme (and very rare) cases, when that party has very good grounds to believe that the formation of the contract is immediately at hand, lacking no more than just the formal confirmation. In order to impose reliancebased liability on the party who withdraws from negotiations, he must have been at fault in giving some basis to the other’s reliance. Withdrawing from negotiations should under these circumstances be sanctioned with liability, in most cases of the negative interest.23 Nothing that is indicated about A’s behaviour in this case, however, seems to reach the level of fault that should be sanctioned with reliance-based liability, taking into account that this test should be satisfied only in very special circumstances. On the contrary, it seems that the general principle of freedom of negotiations should prevail.

Further limits to the freedom of negotiations are derived from the fact that a party is not entitled to enter into negotiations with no true intention to conclude a contract. Trying merely to make out the cost

21For a general discussion of culpa in contrahendo in Finnish law, see the Finnish report on case 1.

22Von Hertzen, Sopimusneuvottelut, p. 266.

23Ibid. p. 276. See also Oikeustoimilakitoimikunnan mietinto¨ (Committee Report on the Revision of the Contracts Act, Komiteanmietinto¨ [Government Committee Reports] 1990:20), p. 129, in which even compensation of the positive interest is regarded as possible in extreme cases.

in contact with X, B would perhaps have rented X’s warehouse if informed about A’s decision. Of course, it cannot be stated with certainty that A had an obligation to give the information to B at that time. But certainly A broke his duties of disclosure and good faith at the latest when misleading B about his intentions by starting negotiations with him. At that time, it is true, B may already have lost his opportunity to contract with X. B, in turn, may have committed contributory fault in not making further effort to find another warehouse during the negotiations with A.

If B, when negotiating with X, had known about A’s decision to sell (which was already made at that time) he would presumably have rented X’s warehouse and avoided the losses due to higher rents, and perhaps even those arising out of an inconvenient place and distribution arrangements. The removal costs, however, would have been avoidable only to the extent that they exceeded costs from moving to X’s warehouse. The losses thus avoidable are in principle recoverable. Whether they are in fact recoverable depends on whether A’s not disclosing his decision to B at that time was blameworthy. We can perhaps make the assumption that A’s behaviour was blameworthy from the beginning of his misleading negotiations with B, at the latest. So B’s losses are recoverable to the extent they were avoidable by that time: the compensation would therefore cover the difference between a possible warehouse that might have been available then, and the actual one rented by B. Also the removal costs, damages caused by the inconvenient place of the new warehouse and the difficulties with distribution arrangements are recoverable only to the extent they could have been avoided by B if informed properly about A’s intentions. The costs pertaining to X’s warehouse cannot as such be taken as the standard, because we cannot take it for granted that A had an obligation to inform B of his intentions at the time of B’s contact with X.

As concerns B’s removal costs and damages caused by the inconvenient place of the new warehouse and the difficulties with distribution arrangements, all these items of damage may be caused rather by B’s own than A’s fault – or they might perhaps have accrued in any case, due to B’s removal. As A is not obliged to continue the lease, he is in principle not liable for such damages. Liability could be established only as far as a causal relationship to A’s blameworthy behaviour described above can be traced.

B had a duty to limit his loss (the principle of contributory fault). As a party to a fixed-term contract, he should have taken into account the