preliminary work B had done, he is liable on the grounds of unjust enrichment (gestion de negocios ajenos).40

If A knew about B’s policy on tendering and single-project work he undoubtedly had the duty to inform B about his parallel negotiations, as this fact was of decisive importance for B. Since this policy concerned the precontractual phase itself, the knowledge of the policy automatically creates a precontractual duty to inform, based on the principle of good faith, as one cannot negotiate in good faith knowing that the other party, if he knew about the parallel negotiations, would not negotiate at all. For this reason A would be liable on the basis of article 1902 of the Civil Code for all expenses and losses B suffered.

Sweden

A is not liable to pay damages if he did not know about B’s policy. If A had such knowledge, it is likely that B would be entitled to compensation.

The main rule is that the parties negotiate at their own risk and cost, that a party can be engaged in parallel negotiations regarding the same object without informing the parties he is negotiating with, and that either party is free to discontinue the negotiations at any time. When the negotiations have reached a certain stage, a party can have an obligation to consider the other party’s interests.41 B exposes himself to huge commercial risks by adopting the policy on tendering and singleproject work as he could not always count on finalising a contract for all offers or negotiations he is involved in.

In NJA 1978.147, the parties during negotiations agreed that in the ongoing renovation of a building, premises should be reserved for the other party (T) and designed in a way that would suit a supermarket. According to the agreement, T had the intention to rent or buy the premises, but neither the rent and time for the lease, nor the price, were agreed upon. Later on, T discontinued the negotiations, the main reason being a market survey showing that an establishment might prove not to be profitable, especially considering the range for the rent or price for the premises indicated by the other party. According to the Supreme Court, the parties were under the obligations to co-operate

40Article 1893 CC; STS, 19 Jan. 1998, RJ 1998\304.

41NJA 1990.745: see the Swedish report on case 1; Hellner, Kommersiell avtalsra¨tt;

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

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with the intention to reach a final agreement and take the other party’s interest into consideration. Therefore, T had to devote himself in good faith to the final decision regarding the establishment of the supermarket and keep the other party informed about the development. However, T had grounds to believe that the other party could take care of his own interests in a commercial relationship of this type. As T had not acted contrary to these obligations, the Supreme Court found that T was not liable to compensate the other party for the costs incurred in the design of the premises. If A did not know about B’s policy, it follows from NJA 1978.147 that A is not liable to compensate B for the costs incurred in the preparatory work.

A party might be considered at fault if he is not acting in accordance with ethical principles in business. However, in a competitive setting, only qualified unethical behaviour by the discontinuing party can make a party liable.42 Since A had reason to believe that B could take care of his own interests, and since it was in B’s interest to secure compensation for his preparatory work, A’s behaviour would probably not be qualified as at fault. If A knew about B’s policy, A may be considered at fault in not informing B about the parallel negotiations with C and thus be liable to compensate B for culpa in contrahendo. In this case, A would have to inform B about the parallel negotiations. As he did not do so and therefore did not give B a chance not to participate in the negotiations, he might be liable to compensate B for his negotiation costs and his costs of the preparatory work.

Switzerland

A is not liable on contractual grounds. No express contract has been concluded, but contracts for the compensation of an architect’s preparatory work can also be concluded implicitly. But the courts act with restraint. In the present case a judge would not assume an implied contract because A has not requested B to make the drawings.43

A is not liable on the ground of culpa in contrahendo. Parallel negotiations generally are not against good faith as long as the party negotiates seriously. The party must always expect that the other party is assessing other alternatives. Parties are therefore not obliged to disclose

42Cf. NJA 1990.745 and J. Kleineman, ‘Skadestandsgrundande upptra¨dande vid avtalsfo¨rhandlingar,’ JT 1991–92, 125, 140.

43Cf. BGE 119 II 43; Gauch, Der Werkvertrag, n. 448.

the parallel negotiations. In the present case A has not violated his duty to negotiate in good faith.

Thus, A is only to blame for having broken off serious negotiations. But a party can only rely on the contract in good faith if the other party has committed himself by an offer. In Swiss law an offer is binding; the reliance is protected in a positive way (positiver Vertrauensschutz); and revocation of the offer is excluded after the other party has knowledge of the offer.44 Another possibility to secure the expectations of a future contract is to conclude a preliminary contract (Vorvertrag). But a preliminary contract is only concluded if the parties have agreed with regard to all essential points.45 The requirements of these two possibilities are not fulfilled in the present case. The prevailing academic opinion refuses to protect expectations in other situations because freedom of contract has priority.46 The negotiating party must always realise that the other party might change his mind. The mere fact that the negotiations have lasted a long time, or that the defendant knows what the plaintiff has invested in the negotiations, are not sufficient for liability.47

On the other hand some authors propose a different solution, under which a party breaking off the negotiations may be liable if he made the other party believe that a contract would certainly come about.48 This opinion is supported by a judgment of the Federal Court of 199549 in which, in a claim against a committee of an athletic competition, the court awarded damages for the expenses of an athlete who was not allowed to participate in the competition. According to the applicable rules of participation, it seemed certain that the athlete should have been allowed to participate. Shortly before the competition the committee changed the rules. As a consequence the athlete no longer

44 OR 9. 45 BernerKommentar-Kramer, OR 22 n. 93, 97.

46Cf. BernerKommentar-Kramer, OR 22 n. 13; Merz, Vetrag und Vertragsschluss, n. 132; Schwenzer, Schweizerisches Obligationenrecht Allgemeiner Teil, N 47.08; Gauch, Schluep, Schmid and Rey, Schweizerisches Obligationenrecht Allgemeiner Teil, vol. I, n. 991ff.; Gauch, Der Werkvertrag, n. 452f.

47BGE, 29 Oct. 2001 no. 4C.152/2001 (in SemJud 2002 I, 164ff.), E. 3; BGE, 3 Feb. 2003 no. 4C320/2002 E. 3.3.

48Cf. Piotet, Culpa in contrahendo et responsabilite´ pre´contractuelle en droit prive´ suisse, 128; Koller, Schweizerisches Obligationenrecht Allgemeiner Teil, § 28 n. 10; Zu¨rcherKommentarScho¨nenberger/Ja¨ggi, OR 1 n. 587 (break-off at an improper time); Gonzenbach, Culpa in contrahendo im schweizerischen Vertragsrecht, 96ff.; Widmer, Umfang des Schadenersatzes bei nicht zur Perfektion gelangten Vertra¨gen, 155, 184; Loser, Vertrauenshaftung im Schweizerischen Schuldrecht, n. 642.

49BGE 121 III 330.

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fulfilled the requirements. The Federal Court held the committee liable for the wasted expenses (nutzlose Aufwendungen) because there was no good (material) reason (wichtiger Grund) for the committee to change the rules. The committee was in a similar situation to the party who breaks off negotiations although it seemed certain a contract would come about. Therefore, in Swiss law breaking off serious negotiations without a good reason can exceptionally lead to liability.50 But due to the lack of court decisions, the prerequisites for liability are not clear. And in the present case the conditions for the liability are obviously not met.

Even if A knew of B’s policy on tendering and single-project work he is not liable on the ground of culpa in contrahendo. According to court decisions there is no duty to disclose the parallel negotiations just because of the knowledge of B’s expenditure.51 A has therefore not negotiated in bad faith.

Even if one takes the opposite opinion, put by some authors, it does not seem certain that A must compensate the whole of B’s work. On the one hand, B must prove that he has missed out on other contracts because of his preparatory work.52 In this connection the judge may assess the damages in his discretion.53 On the other hand, it is questionable whether B has done his preparatory work in good faith.54 The work served not to conclude the contract but to prepare its performance: this justifies a reduction of the compensation.55

Editors’ comparative observations

This case gives rise to two separate issues: the negotiating party who carries out preparatory work in the hope of concluding the contract (and, when the contract does not materialise, has the loss of both the

50In BGE, 29 Oct. 2001 no. 4C.152/2001 (in SemJud 2002 I, 164ff.), E. 3 the Federal Court held that in exceptional cases liability may arise because of the break-off of negotiations, for example if the defendant had made the plaintiff believe that a contract is certain to come about. Confirmed in BGE, 17 Nov. 2005 no. 4C.247/2005 E.3.

51See BGE, 29 Oct. 2001 no. 4C.152/2001 (in SemJud 2002 I, 164ff.) E. 3a; BGE, 3 Feb. 2003 no. 4C320/2002 E. 3.3; BGE, 16 June 2004 no. 4C.56/2004 E. 2.3/2.4. Contra S. 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, 531.

52Lost profit (entgangener Gewinn).

53OR 42. Cf. BGE, 3 Feb. 2003 Nr. 4C320/2002 E. 4, where the court recognised the wasted expenditure and time.

54In bona fide: cf. the Swiss report on case 3. 55 OR 44.

hope of that contract and of any other contract he might have entered into during the negotiations); and the fact that the other party, who ultimately breaks off the negotiations, was conducting parallel negotiations with someone else. The case is set in the particular context of a party, B, who has a particular policy of not undertaking more than one job at a time, and not competing in competitive tenders; and it offers a variation: whether it makes any difference whether or not the party breaking off the negotiations, A, knew of this policy. There is agreement amongst the jurisdictions on some matters, but disagreement on others.

Precontractual expenditure: all jurisdictions start their analysis from the same point: that precontractual expenditure by a professional such as B (an architect, negotiating for a design contract) is generally at the spending party’s own risk. On the facts, the negotiations had been continuing for a year (and B’s expenditure had been growing over that period). But the only jurisdictions to suggest that this might make a difference are Finland (which suggests that there might have been an obligation on A to inform B once the parallel negotiations with C had reached a stage of being likely to be concluded) and the Netherlands (which can contemplate the possibility that the negotiations had reached a sufficiently advanced stage to give rise to A’s liability for breaking them off (the length of the negotiations is not there conclusive but is relevant to answering this point) but which (paradoxically) may not cover the architect’s expenditure). All other jurisdictions take the position that, unless it is possible to construct some other basis of liability which does not immediately appear from the facts (either a contract between A and B for the precontractual work to be done, or that A either requested the work to be done or has obtained a benefit from it, which might in several jurisdictions give rise to claims for unjust enrichment), the basic position (B’s expenditure is at his own risk) is maintained. A number of reporters observe that this position is reinforced by general commercial understandings of the risk allocation of precontractual expenditure, and the fact that B’s own expenditure here is in pursuance of an unusual, personal policy about the negotiations of which he cannot expect A to bear the risk when the negotiations are broken off, at least in the case where A does not know of the policy. There is less agreement between the jurisdictions as to how to deal with the case when A does know of B’s policy (see below).

Parallel negotiations: similarly, all reporters start their analysis of the parallel negotiations from the same point: in principle no wrong is

(Denmark, Germany, Norway, Portugal and Switzerland) would say that the mere fact that A knows about B’s policy does not impose on him this duty to inform. The general approach here is to say that if B wishes to impose a restriction on A’s normal freedom to negotiate with others, or if he wishes to pass to A the risk of B’s precontractual expenditure, it is not sufficient just to inform A of the policy, but to go further, such as to obtain A’s agreement to compensate if the contract does not materialise.

Measure of the remedy: in those jurisdictions where A would be required to pay damages,57 most say that if A is in breach of his duty to inform B of the parallel negotiations, he then becomes liable not only for B’s expenses in the negotiations, but also for the potential loss of other contracts (if they can be proved: this might in some jurisdictions58 be treated as a quantification issue, for the loss of the chance of another contract). However, some (Greece, Switzerland) would say that the general preparatory work, which was under the normal principles of risk allocation begun by B at his own risk, remains so and is therefore excluded from the damages calculation, or that at least the compensation has to be reduced; or (Finland) emphasise that since the duty which A has broken is to inform of his parallel negotiations, he cannot be liable for all of B’s losses but only for those incurred after A failed to inform B in fulfilment of his duty.

57Or, at least, might be liable to pay: some jurisdictions are rather tentative about the basis of liability (e.g. Austria, Finland and the Netherlands).

58See in particular the French report above.