of the case to nourish B’s expectations.18 B undertook a step beyond that which was necessary in the preparation for the prospective contract and, if the contract does not come about, he alone must account for the loss. He cannot transfer this to A’s risk. Perhaps A was morally wrong in doing nothing to prevent the construction, but by doing nothing it did nothing legally wrong. Thus, it is most likely that A was not acting in bad faith when breaking off negotiations, even if it knew that B had proceeded with the construction of the shopping centre.19

Ireland

A has no liability to B.

On the facts given, A has made no representation or promise or undertaken any action that can be construed as creating a reasonable belief in B as to A’s future course of action with respect to the contract. Admittedly B, in the hope that A will complete the contract negotiations successfully, has altered his course of action. But there is nothing disclosed which indicates that this was anything other than B’s own decision. The building was not done at A’s request, nor does it appear that A in any way influenced B’s actions. No action lies in contract, tort or restitution.

Italy

This is a case of withdrawal of a contractual proposal (revoca della proposta) as provided by article 1328, paragraph 1 of the Civil Code. When a contractual proposal is withdrawn in breach of the duty of good faith in negotiations, both Italian academic writing20 and case law21 recognise precontractual liability of the party who made the proposal. According to article 1328, the proponent (proponente) always has the right to withdraw his proposal until the contract is concluded. But when the recipient has begun his performance in good faith and before having

18Cf. T-203/96 Embassy Limousines v. European Parliament [1998] ECR II-4239, where, contrary to the facts under discussion here, preparations were requested and supported for the proper performance of the forthcoming contract.

19Cf. Gazis, Legal Consultations 1956–1999, pp. 300–1, who indicates that the initiation of performance by one party during the negotiation stage reinforced the impression that the contract would be concluded, which makes it significantly more difficult for a party to terminate the negotiations. He claims that this is venire contra factum proprium conduct which is prohibited by article 281 GCC on the abuse of a right.

20See F. Benatti, ‘Culpa in contrahendo’ CI 1987.

21In particular see the position of Italian Supreme Court in Cass, 8 Mar. 1972, n. 664, which remains unchanged.

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notice of the other party’s withdrawal, the proponent has to pay all his expenses and his consequential losses.

Italian case law sees this as either a case of liability without fault (responsabilita` senza colpa),22 or a case of culpa in contrahendo because of the breach of the duty of good faith (the parties’ duty of co-operation) during the negotiations.23 In any case it is necessary for the claimant to prove his reasonable reliance. Academic writers, however, considered damages under article 1328, paragraph 1 as deriving from a ‘damaging but licit conduct’ (atto lecito dannoso),24 giving rise only to ‘reliance damages’ (recovery of expenses incurred between the notice of withdrawal and the time agreed for the conclusion of the contract).

In this case, the judge will have to decide whether A acted in bad faith, or whether B unreasonably snapped up A’s offer. It would be important for the judge to decide whether A was in breach of a duty to warn which was implied within its general duty of good faith in negotiations. On the other hand, B must give evidence of his own justified reliance. In this, it would be for the judge to decide whether the documents by which A indicated its requirements for the department store constituted sufficient evidence of its real intention to contract with B. There could always be a question of why B had not given A any survey before starting construction.

If B shows sufficient evidence about A’s serious proposal to contract, according to article 1328, he will recover his losses and the expenses of building. Moreover, if it emerges that A was aware that B had begun the building works, it would be difficult to justify its delay in communicating to B its intention to withdraw. On the other hand, if A was not so aware, its conduct would still seem negligent given the length of time required for the construction of a department store.

If A’s breach of good faith in negotiation is shown, the judge could then increase the damages payable according to A’s fraudulent behaviour: B could ask for the recovery of all his loss, although limited to the interesse negativo, as discussed in relation to case 1.

In a case of withdrawal of a contractual proposal, article 1328 seems to extend protection beyond the general principles of precontractual liability.25 The offeree is deemed liable not because of his misbehaviour,

22 Cass, 7 May 1952, n. 1279. 23 Cass, 31 Jan 1969, n. 296.

24Mirabelli, Dei contratti in generale; Bianca, Diritto civile, vol. 3, Il contratto.

25Especially the duty of good faith under art. 1337 c.c., discussed in the Italian report on case 1. It should be noted that most of the decisions on art. 1328 have been about public bids (see App. Milano, 15 Mar. 1985), and particularly cases of public

244 precontractual liability in european private law

indications given by A, and A remained silent, may have induced B justifiably to believe that a contract would be concluded. A Dutch court may hold that A should have warned B that it was not yet certain that agreement would be reached and that by not doing so it has induced B to expect that a contract would be reached. Such a holding would not provide incentives for recklessly starting to perform contracts that have not yet been concluded, and thus for imposing the conclusion of a contract or extensive liability upon the other party, because A could easily have avoided liability by warning B. Since, however, it did not do so, it will probably be held liable for breaking off negotiations. B will then be entitled to compensation for loss of profit, or may even obtain a court order (with a private penalty: dwangsom) which forces A to continue negotiations or even to conclude the contract.

Norway

It is assumed that the contract for the entire project has not been entered into, and that B commences the construction work on his own initiative, that is, not in agreement with, or on the order of, A. Hence, there is no presumption by the parties that A is to cover B’s wasted expenditure. However, the result in this case would to some extent still depend on how the facts are interpreted.

The fact that B on his own initiative commences the construction (on his own property) should not be of major significance with respect to the question of liability.32 It would, however, have a certain influence on the question of good faith inasmuch as A was aware of the construction work, especially with regard to the duty to inform.

On the other hand, a reason for discontinuation would influence the result of the case. The facts state that A ‘has then done a survey of the likely client base, and has decided that a store in the location would not, in fact, be sufficiently profitable’. Regarded separately, this is, of course, a valid reason for discontinuing the negotiations. The question remains, however, whether the possibility of reduced market value should have been clarified in advance. If changes occur in the external market situation causing A to drop the project, A has no liability. This is

32In Rt 1992, 1110, the Stiansen case, at 1115, the presiding judge states that ‘however, Stiansen had here put himself into a difficult position, even before the finalisation of the contract, by commencing the construction work, and chose not to terminate the project at the time of OBOS’s letter of 19 January 1988 [in which it was stated that the price of the construction was exceptionally high]’. In other words, this

was a risk the construction company itself was responsible for.

part and parcel of the general risk facing businessmen when no binding agreement exists. But there is good reason to believe that a contrary point of view should be taken if there had not been any significant changes in the market situation. The parties should have made a proper evaluation and examination of the feasibility of the project in advance, even if it would obviously have been acceptable at a later date for them to analyse their needs in depth.

In NJA 1978.147, the Abacus case, the Swedish Supreme Court moved in the opposite direction. This case concerned negotiations with respect to the purchase of newly constructed premises. Since a supermarket was to be operated on the premises, the owner had refurbished them with this in mind. However, the potential buyer broke off the negotiations as a result of a market investigation he conducted. The claim made by the owner of the premises to be reimbursed for his wasted project and installation expenses did not succeed. The Supreme Court stated that:

when the project agreement was entered into, it must have been evident to both parties that the possibility for a later discontinuation of the agreement depended on certain undetermined factors and that the cooperation of the parties consequently was subject to risk, which was particularly evident with respect to Abacus’s planning and the refurbishing of the premises according to To¨ssberg’s wishes.

It was further noted that ‘the other party should himself have been able to protect his own interests without the necessity on To¨ssberg’s part to indicate or suggest an intended discontinuation of the agreement’. The rationale for this judgment might have been that the owner of the premises had sufficient insight into the elements of risk. However, it is doubtful whether the result would be identical today.33 Legal developments in this field in recent years have probably occasioned stricter requirements with respect to the good faith of the parties involved than was previously the case.

It is therefore likely that A would here be held responsible, particularly if it realises that the construction has commenced, since it should have warned B about the risk that the contract might not be concluded.

33This case is also discussed in the Swedish report on this case, below, but in Sweden it is thought still to apply, and not to have been superseded by changes in the courts’ approach to the precontractual phase.