Portugal

judges apparently finding for him on the basis of fraud, and a third on the basis of Walker v. Milne. In Heddle v. Baikie,37 H possessed B’s farm for six years without any formal lease (although it was understood that one was to be executed) and made improvements. He was then ejected. A claim for loss and expenditure was allowed. In Dobie v. Lauder’s Trustees,38 D undertook the care of certain children in return for an annual payment from the trustees. Because it was envisaged that this arrangement would last some years, D entered a seven-year lease of a house in Frederick Street, Edinburgh, and incurred other expenses. After a dispute about the amount of the annual payment, the children were withdrawn from D’s charge. She claimed successfully against the trustees for reimbursement of her expenses. The Second Division was clear that there was no contract in this case but only a family arrangement. But, said Lord Justice-Clerk Moncreiff,39 ‘the arrangement necessarily included the condition that if the arrangement was terminated it should not be to the loss of one party’. Lord Neaves took a slightly different view:40

I think that the legal principle applicable to the case is this: that when parties are engaged mutually in promoting an object of common interest, and the expenses entailed in furthering that object are thrown on one of the parties, then when that expenditure fails of obtaining the end aimed at the partydisburser must be recompensed, as being the disburser for a common object.

The last case in which recovery was allowed is Hamilton v. Lochrane,41 where a party made alterations to his villa in reliance on a verbal (and so unenforceable) agreement for its sale. When the buyer withdrew, the selling party made a claim for reimbursement of his expenses. He was allowed a proof. Here it could not be said on any view that the defender had been enriched; the claim was purely one of reimbursement for the pursuer’s reliance expenditure. Again, we have unilateral withdrawal from an arrangement the terms of which were substantially settled.

However, Walker v. Milne was said in 1875 to be not a case of general application42 and the reimbursement remedy was available only if substantial loss was occasioned to one party by the representations recklessly and unwarrantably held out to him by the other party. The present facts do not suggest that there have been any reckless or unwarrantable misrepresentations made by A to B. In recent times,

37 (1846) 8 D 376. 38 (1873) 11 M 749. 39 At 755. 40 Ibid. 41 (1899) 1 F 478.

42 Allan v. Gilchrist (1875) 2 R 587, 590.

248 precontractual liability in european private law

Walker v. Milne has been re-interpreted as one where there would have been a binding agreement were it not for formalities (requirements of writing) that had not been complied with.43 The same cannot be said of this case; it seems that there has not yet been agreement on all major points of the lease. It seems unlikely that there could be said to be any element of partnership between A and B.44

Spain

A is liable to B in tort, in culpa in contrahendo. The four conditions established by the Supreme Court are probably established.45 The fact, known by A, that B begins building during the negotiations is a very strong indicator that the relation between those two can be qualified as a reasonable situation of confidence concerning the conclusion of the contract. Concerning the second condition (the absence of justification for the break-off of negotiations), A does actually give a reason which explains why it lost interest in the contract. But good faith requires different behaviour. A, knowing that B is firmly counting on the conclusion of the contract, and has already started working on the basis of its layout, has a duty to inform B either about the uncertainty of its concluding the contract or about the fact that it is still waiting for the results of the survey – but at least about the fact that such a survey is being undertaken. If B knows about this fact, he consciously builds at his own risk. Otherwise A negotiates in bad faith and the abrupt breakoff of negotiations is not justified. Concerning the third and the fourth conditions, B suffers loss by building in a way he would not have built, if he would have built at all (reliance damages), and by not being able to find any alternative department store as tenant (expectation damages). As the liability is based on tort, only reliance damages are covered. The causal link serves to decide on the amount of damages: it is necessary to establish how B would have acted knowing about the survey and its importance for A. Most probably he would not have started building before knowing its result.

Another possible approach would be to establish the existence of two contracts: on the one hand, a mandate to build in a certain way, on the

43See the interpretation placed upon the case by Lord Cullen in Dawson International plc v. Coats Paton plc 1988 SLT 854, affd. 1989 SLT 854. A wider approach to the relevant authorities is suggested in MacQueen and Thomson, Contract Law in Scotland, paras. 2.95–2.96.

44Cf. CIN Properties Ltd v. Dollar Land (Cumbernauld) Ltd 1992 SC (HL) 104.

45STS, 14 June 1999, RJ 1999\4105. See also the Spanish report on case 1.

other hand, the rent. The conclusion of the second contract (rent) can be understood as ‘price’ for the first. In that case, the parties have concluded the first contract, but the terms of the second contract are not yet completely clear. But A has to conclude the second contract; otherwise, it has to pay damages.

Sweden

A is not liable to compensate B.

In NJA 1978.14746 the circumstances were very similar to those in this case. During negotiations, the parties agreed that in the ongoing renovation of the 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 term 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 with the intention to reach a final agreement and to 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 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. There is very little in the later development that shows that the law in this particular respect might have changed since the case was decided.

In the present case, no precontractual agreement was formed according to which A had an intention to conclude an agreement with B. The remaining issue is therefore whether A during the negotiations acted in a way that could be a ground for compensation due to culpa in contrahendo. There is no indication that A was late or careless when

46This case is also discussed in the Norwegian report on this case, above, although it is there said to be probably no longer of authority, in the light of the development of a stricter doctrine of precontractual good faith. The case NJA 1978.147 is also discussed in the Swedish report on case 4. See also Adlercreutz, Avtalsra¨tt.