doing so. The requirements for pleading this form of personal bar are: (i) one of the parties to the contract must have acted or refrained from acting in reliance on the contract (party B); (ii) the action or inaction must have been known to the other party (party A); (iii) party B must be able to demonstrate that he has been affected to a material extent by his (in)action in reliance on the contract; and (iv) party B must show that he will be affected to a material extent if party A is permitted to withdraw. On the given facts, it may be problematic for B to meet all of these requirements. In particular, the requirement that B show that his action in commissioning the architect and the estate agent were undertaken in reliance on the agreement may be hard to meet, as the commissioning of an estate agent and architect will normally occur before an agreement (albeit informally made) was reached.

It is conceivable that A might be sued by B in delict for some of the losses, but that B might choose to sue his estate agent for the remainder of the losses (for instance, those occurring after the point at which a proper examination of title ought to have occurred). Double recovery for the same losses would not be permitted. If B seeks to compel A to transfer his one-third share to B, it is conceivable that a damages claim might still lie for certain losses on the basis, for instance, that the architect’s plans constitute wasted expenditure, B being unable to build on a plot of which he is only a co-owner.

Spain

In Spanish law, contracts for the sale of land are valid by mere consent, if the objects of the contract (the land and the price) are determined and the cause (causa) is licit.67 The requirement of a formal document68 is only a formality ad probationem and not ad solemnitatem,69 and so a party is entitled to demand that the public document be made if he can prove the existence of the agreement.70 Furthermore, based on just a promise to buy or to sell, the contracting parties can ask for performance of the contract.71

If B can prove that he and A reached an agreement, he is entitled to demand the performance of the contract. According to Spanish case law, the fact that A was not sole owner by inheritance is not an excusable error,72 as he must have known about the existence of

67 Articles 1261, 1278, 1445ff. CC. 68 Articles 1280, 1 CC (‘public document’).

69STS, 16 May 1996, no. 401/1996, RJ 1996\4348.

70Article 1279 CC. 71 Article 1451 CC. 72 Article 1266 CC.

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his two sisters and the rights in inherited property are normal and generally known (or at least, using due diligence, easily knowable) circumstances.73 For this reason there is a valid contract between A and B. Based on A’s incapacity to fulfil the contract, B can rescind the contract and claim damages.74 He is to be put in the same situation as he would have been had the contract never been concluded (intere´s negativo), which means that all expenses of negotiation and the architect’s expenses can be recovered, as all of those costs were foreseeable.75 A might exclude the costs of the architect from his liability, if he manages to prove that he did not, and could not, know of B’s intention to build on the land, although this seems very unlikely.

Even if he cannot prove that there has been a contract of sale, but proves an agreement to conclude a future contract, B can claim the same damages.76

Sweden

A is not bound by his oral promise to sell and is not liable to compensate B. A binding agreement for sale of real estate requires the agreement to be in writing. The written agreement should contain, inter alia, the price and a declaration by the seller that the ownership of the property is transferred to the buyer. Neither party is bound by an agreement for sale of real estate until it fulfils the form requirements.77 A is not liable in contract since the form requirements are not met.78

There may be a ground for liability due to culpa in contrahendo, even if the main rule is that a promise to buy or sell real estate could not lead to liability.79 The actions or omissions that could amount to a case of culpa in contrahendo in real estate transactions have to be serious. A person inheriting real estate has to apply for the registration of the title to the property within a certain time.80 The certificate of registration of title should contain the name of the owner(s) of the property. If no

73 STS, 27 May 1992, RJ 1982\2605. 74 Article 1124 CC. 75 Article 1107 CC.

76Article 1451, 1124 CC; STS, 29 July 1996, no. 680/1996, RJ 1996\6408, TERCERO and CUARTO.

77Real Estate Code (Jordabalken av den 17 Dec. 1970 (JB)), Ch. 4 §1.

78Grauers, Fastighetsko¨p; Hellner, Kommersiell avtalsra¨tt; J. Kleineman, ‘Avtalsra¨ttsliga

formfo¨reskrifter och allma¨nna skadestandsra¨ttsliga ansvarsprinciper’, JT 1993–94,

433; J. Kleineman, ‘Skadestandsgrundande upptra¨dande vid avtalsfo¨rhandlingar’, JT 1991–92, 125; Ramberg and Ramberg, Allma¨n avtalsra¨tt.

79 NJA 1973.175. 80 Ch. 20 §1 JB.

application has yet been made when A initiated the negotiations and A then thought that he was the sole owner, this could probably not amount to such negligence that could result in liability. If A was considered to have acted negligently and therefore B would be entitled to damages, there is no support for any liability for damages outside the reliance interest. B would therefore be entitled to damages for expenses incurred during the negotiations. However, it is highly uncertain whether any damages would be awarded for A’s costs of the architect, as these would probably be regarded as too remote according to the principles of adequate causality.

Switzerland

A is not liable on the basis of a contract. Although it is possible to conclude an oral contract, if the parties reserve a certain form it means that the form is constitutive and the parties intend not to be bound before such form requirements are met.81 The other party would have to prove the opposite: that the written form serves only to make the proof of the contract easier. This is not possible in the case of a land sale because a formal public deed is required by law.82

If a party refuses to fulfil the form requirements he will be treated as having broken off serious negotiations. But in Swiss law, breaking off serious negotiations makes a party liable only in exceptional situations.83 A’s fault is not simply in breaking off the negotiations, but because he has negotiated without reservation although he knew or ought to have known that there was an obstacle to the sale of the land.84 In a similar case the Federal Court of Switzerland held a bank liable on the ground of culpa in contrahendo because its local branch had negotiated a loan contract which required the approval of the head office; the

81 OR 16 I. 82 OR 216 II.

83See Loser, Vertrauenshaftung im Schweizerischen Schuldrecht, nn. 635ff., 642. Especially for contracts with form requirements: Gonzenbach, Culpa in contrahendo im schweizerischen Vertragsrecht, p. 98ff.; Schmid, Die o¨ffentliche Beurkundung von Schuldvertra¨gen, n. 834; Hartmann, ‘Der Abbruch von Vertragsverhandlungen als Entta¨uschung von Vertrauen–Bemerkungen im Anschluss an das Bundesgerichtsurteil 4C.152/2001 vom 29. Oktober 2001’, ZBJV 2003, 536; BGE, 29 Oct. 2001 Nr. 4C.152/2001 (in SemJud 2002 I, 164ff.), E. 3b. Contra Schwenzer, Schweizerisches Obligationenrecht Allgemeiner Teil, N 31.43; Widmer, Umfang des Schadenersatzes bei nicht zur Perfektion gelangten Vertra¨gen, p. 181ff. See general discussion in the Swiss report on case 4.

84See P. Tercier, ‘La culpa in contrahendo en droit suisse’ in Premie`res journe´es juridiques yougoslavo-suisse (Zu¨rich, 1984), pp. 225, 229: ‘Ce n’est pas tant le refus de conclure qui est en soi critiquable . . . , c’est le fait de tromper la confiance d’autrui par une attitude qui suscite l’espoir infonde´ que le contrat sera certainement conclu.’

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bank managers could have realised with due diligence that the approval was necessary and they could have informed the other party about that requirement. The Federal Court did not exclude the liability just because the bank managers did not act wilfully: even negligent acts can lead to liability.85 Thus, the duty to negotiate in good faith not only prohibits negotiating without the serious intention to conclude a contract; it also obligates the party to disclose objective and subjective obstacles to the contract that the party is able to recognise.86 This rule applies also for contracts that require a special form.87

A is therefore to blame that he negligently did not inform himself about the ownership of the land and that he did not disclose this information to B. A has violated his duties to negotiate in good faith.

A has to compensate B for the negative interest (i.e. reliance interest), to put B into the position in which he would have been if he had known of the obstacle to the contract and had not relied on the contract. A must compensate B for the expenses incurred in the negotiations.

The architect’s expenses are also part of the negative interest because B would not have had the architect make the drawings if he knew about the obstacle. But these expenses can be compensated only if they were incurred in bona fide.88 The expenses must have been reasonable in the circumstances. But the contract was not certain, and B should have realised that A might change his mind. Therefore, A must compensate for the architect’s expenses as far as they served for the decision to conclude the contract; they are expenses incurred in the negotiations. But the judge can reduce the compensation according to OR 4489 if the expenses were incurred to allow B to use the land. The expenses of performance of the contract, or the use of the object of the purchase, incurred before the contract is concluded, are generally at the party’s own risk.90

85BGE 105 II 75, 80ff.; BGE, 3 Feb. 2003 no. 4C320/2002 E. 3.3.

86Cf. BGE, 5 Mar. 2001 no. 4C.356/2000 E. 5b; BGE, 8 June 1998 (in SemJud 1999, 113ff.), E. 3.

87Cf. BernerKommentar-Kramer, OR 22 n. 16; BGE, 30 Jan. 2001 no. 4C.253/2000 E. 3.

88There is an express limitation of compensation for expenses in bona fide in the provisions on betrothal according to ZGB 92 (cf. case 5). This rule should be applied if a contract has not yet been concluded.

89OR 44 I: ‘The judge may reduce or completely deny any liability for damages if the damaged party consented to the act causing the damage, or if circumstances for which he is responsible have caused or aggravated the damage, or have otherwise adversely affected the position of the person liable.’

90BernerKommentar-Becker, OR 26 n. 6ff.; Zu¨rcherKommentar-Oser/Scho¨nenberger, OR 39 n. 10ff.

Editors’ comparative observations

This case shows a significant difference of approach across the jurisdictions under consideration. Some provide B with a remedy, others do not; and even within jurisdictions that agree on there being (or not being) a remedy, the reasons are not unanimous. In assessing the reports on this case it is important to consider the influence of the context – given that the jurisdictions take into account in differing ways, and to different degrees, the fact that a contract for the sale of land might for reasons of policy have special requirements of form – and to disentangle this from the more general question of on what basis, if at all, A should be liable.

Context: negotiations for the sale of land: a key feature of the case is that it involves negotiations for a contract for the sale of land. Jurisdictions differ on whether there are requirements of form for the validity of such a contract. Those for which there is no such requirement rest their analysis on a similar basis to that in other cases of failed negotiations (see, for example, the discussion of this in the Dutch, French and Norwegian reports). However, amongst those which have a formal requirement some hold that it has an impact on the negotiation stage to the point of overriding the normal rules of precontractual liability/culpa in contrahendo, whilst for others the formality requirement only excludes the enquiry based on possible contractual liability (given the absence of a formal contract here) but leaves open the possibility of invoking the non-contractual bases of liability. The clearest example of the formal requirements overriding the normal rules is Finland, where the Code of Real Estate becomes the basis on which the analysis of A’s (precontractual) liability is assessed, thereby removing the usual enquiry as to whether A was at fault, or in bad faith, in order to impose liability on him for having withdrawn from the negotiations. But in the application of their rules governing the negotiation stage some other jurisdictions (Germany, Norway and Sweden) also take into account the fact that the negotiations are for a contract which has a requirement of form for its validity, on the ground that to impose non-contractual liability might undermine the policy of the statute which set the formal requirement; and England, which does not in any case have a general principle of precontractual liability, is even more cautious in assessing the precontractual stage where the negotiations are for a contract for the sale of land.

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Precontractual liability/culpa in contrahendo: amongst the jurisdictions which have a general principle of precontractual liability (whether autonomous or within the law of tort) the reports on this case point to differences in the application of the principle. Some jurisdictions focus on the absence of A’s intention to inflict damage on B – the fact that A is, at most, negligent – as a distinguishing factor from other cases in this study, and therefore cannot find him liable: for example, Austria and Germany, which have a claim in tort (in addition to culpa in contrahendo) where the defendant intentionally inflicts economic harm, emphasise the absence of intention here as one of the reasons for there being no liability for culpa in contrahendo either. Norway also appears to be reluctant to impose liability for simple negligence. However, other jurisdictions find A liable on the basis of his negligence (France (although there is some conflict there with case law, which appears not to hold negligence to be sufficient in a case such as this), Greece, Italy, the Netherlands, Portugal and Switzerland). The trigger for liability is sometimes said to be A’s failure to inform B of the problem over his title to the property (Greece, Italy and Switzerland) or A’s failure to refrain from the negotiations until he has ensured that he has authority to sell the property (the Netherlands). Since A did not in fact know of the problem over his title, the breach of the duty to inform is itself based on negligence – his failure to inform himself, and thereby to have information which he should have passed to B (see, for example, the Greek report).91 The Netherlands and Switzerland both find the trigger (also) in the fact that without good reason A broke off the negotiations at such a late stage, although in the case of Switzerland it is not just the breaking-off that counts, but doing so in circumstances where he was negligent about his title. The approach of the Netherlands, by contrast, is to regard simply the breaking-off as the key, because it happens in the ‘third stage’92 of negotiations, when even the expectation measure of damages might be awarded for precontractual liability.

‘Negligence’: fundamental to the analysis of this case, therefore, in many jurisdictions, is the fact that A did not intend to harm B, but may have been negligent. The actual results of the case can vary depending on how the different jurisdictions view the place of negligence in their rules of precontractual liability, as well as how they interpret A’s

91For a broader enquiry into the duty to inform, see the companion volume in this series, Sefton-Green, Mistake, Fraud and Duties to Inform in European Contract Law.

92For the three ‘stages’ of negotiations, see the Dutch report on case 1.

conduct on these facts. It is important not to place too much importance on differences which flow from this last point; again, it is often the particular context of a contract for the sale of land and where the problem is one of A’s title to the land, that directs reporters to decide whether or not A was negligent on the facts, often dependent on the local practice as to when and how title to land is normally investigated.

The fact that A may be (at most) negligent is also significant for England, Ireland and Scotland. In these jurisdictions there is no general principle of precontractual liability; and on these facts there is no contractual claim because of the failure of the required form for contracts for the sale of land.93 So the enquiry has to move to the law of tort, in order to find a particular basis of claim, which again94 focuses on whether A has made a misrepresentation. Since A was not fraudulent, the tort of deceit cannot be invoked: at most, this is a case of negligent misrepresentation. The trigger for liability (if any) is therefore the false statement that A might be held impliedly to have made about his title (these jurisdictions do not even begin to contemplate that A’s silence could have been sufficient – that he might have been under a duty to inform about his title). But a misrepresentation is not a sufficient trigger on its own; it has to be a misrepresentation recognised as actionable within the rules of a particular tort (here, the tort of negligence). The reporters have interestingly differing views about how easily the tort of negligence can be invoked in such a case (Ireland is silent about it, apparently assuming that negligence could not be sufficient here).

Contract: jurisdictions which have formal requirements for the validity of this type of contract cannot rest A’s liability on contract. However, those jurisdictions which do not have such a requirement are sometimes able to hold that, since the agreement was here concluded – and as long as the signing of the written document on 2 December should not be interpreted as undermining the parties’ agreement on the terms of the contract – the contract can itself be a source of liability. This is an approach taken by Denmark, France, Norway and Spain, although each of these then has to sort out how their law of contract

93There are, however, differences here: in Ireland the statutory requirement is evidential, whereas in England and Scotland it goes to the validity of the contract. But in none of the three jurisdictions is the formality satisfied, nor can any exception to the formality requirement be invoked, on the facts, although the Scots reporters consider whether A might be barred from denying the enforceability of the contract.

94See also, e.g., the English, Irish and Scots reports on cases 1 and 2.

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and/or law of property will solve the difficulty arising from the co-ownership of the land with A’s sisters, particularly if (as in the case of France) the remedy under the contract might be the specific enforcement of the contract itself, rather than just damages.

Scope of recoverable loss: in those jurisdictions which would impose liability on A there is some disagreement about the scope of recoverable loss. Apart from those cases where the claim can be founded on contract, and the Netherlands (where the claim might be for the breaking-off of negotiations in the third stage, giving rise to expectation damages), the remedy is reliance damages, which is generally agreed to include B’s expenses in the negotiations. Some jurisdictions, however, are doubtful about the architect’s fees, either because they are the kind of precontractual expenses which should be at the spending party’s own risk (Denmark and Switzerland; an explanation also given by the Austrian reporter who, however, would not find liability in any event), or there might be difficulties in showing a sufficient causal link (or they might be too remote) (England, Greece, Spain and Sweden). On the other hand, Italy and Portugal contemplate the possibility that B’s damages might be reduced to take account of the fact that he was also at fault.