Case 9: Breakdown of negotiations to build a house for a friend

and builder. Since A and B were still in negotiations when the construction work began, and since these negotiations were broken off by A, there is no contract.

The general rule is superficies solo cedit: the owner of the land acquires ownership of the building and the bona fide constructor will be compensated for his expenses. However, there is an exception from this rule, stated in §418 ABGB:

if . . . a person constructs a building on the [land] of another using his own materials but without the knowledge and consent of the owner, the building becomes the property of the owner of the [land]. The bona fide constructor can demand compensation for the necessary and [profitable] expenses; the mala fide constructor is to be treated as an unauthorised agent. If the owner knew of the construction, and did not immediately order the bona fide constructor to [stop] such construction, he can only demand the general price for the [land].

Thus §418 ABGB gives a precise answer to this case: since A knew of the construction works by B and did not intervene to stop the works, he loses ownership of his land. B becomes owner of the land on which the building has been constructed, but the market price of the land has to be paid by B to the original owner A.1

Denmark

A Danish court might find some basis of liability in the consideration that A, on whose land B builds the house, should have warned B not to start building until A was certain that he could afford it. On the other hand, if B starts the work without A’s express consent and knowing that A is a poor person he must know that he takes a risk, and perhaps as a friendly turn he then assumes that risk. In that case a court (acting as an amiable compositeur – Danish courts sometimes do that, although they are unwilling to admit it) might award B what it finds that A can afford.

A Danish court would not give much thought to the question whether A’s liability is in contract, tort or restitution.

The court may also conclude that A has no liability. It might hold that we are in the area of friendly turns where the law should abstain from interfering and on this ground find A not liable.

1There are a very few rather old cases on §418 ABGB; see, however, OGH 15 Mar. 1989, JBl 1989, 582, stating that it is the mala fides of the owner of the land that is sanctioned by the loss of his ownership and the acquisition of ownership by the constructor.

256 precontractual liability in european private law

England

A may be liable to pay B the value of the benefit he has obtained by virtue of the (nearly complete) house having been built on his land: this is a claim in restitution.

B has no claim in contract, since there is not yet any concluded contract for the house. Nor does B have any claim in tort: A commits no tort by breaking off the negotiations, nor is there any evidence of any misrepresentation made during the negotiations which would give rise to such a claim; for example, it appears that A discovers only at a late stage that he cannot afford the building works, and so he does not make any fraudulent misrepresentation on which B relies in continuing the work.

However, B has commenced the building work in the anticipation that the contract would be concluded; and in doing the work he has conferred on A the benefit of the building in circumstances where it was intended by both parties that A would pay for it but on a basis which had not yet been finalised. Since the building is a fixture it becomes A’s property, and insofar as it increases the value of his land A obtains a valuable benefit. If the breakdown of the negotiations was A’s fault, he would be required make restitution in monetary terms.2 B will claim on this basis, although it is not certain that he will succeed, since A may successfully argue that B knew that A’s ability to agree a price was uncertain, and therefore B carried out the work at his own risk. More detail would be necessary of the facts surrounding B’s decision to start work, such as whether A made any request for the work to be started, or gave any assurances about payment. If a restitutionary claim succeeds, the valuation of the benefit cannot be made by reference to the contract since there is not yet an agreed contract price for the value of B’s services. The valuation must therefore either be by reference to a reasonable rate for the work done by B; or, more likely, by reference to the increased value of A’s land with the house built on it.3

2Brewer Street Investments Ltd v. Barclay Woollen Co Ltd [1954] 1 QB 428, 431 (Romer LJ: ‘Suppose that, whilst parties were in negotiation for a lease, the landlords allowed the prospective tenants to go on the land and spend money on it in anticipation of a lease. If the landlords subsequently broke off negotiations for no reason at all they could not get the benefit of the work without paying for it’).

3British Steel Corp v. Cleveland Bridge and Engineering Co. Ltd [1984] 1 All ER 504 (reasonable price payable for work done in anticipation of a contract which was confidently expected to materialise, but in that case there was a specific request by the defendant for the claimant to begin work in anticipation of the contract).

258 precontractual liability in european private law

had not yet concluded the contract and had not yet settled the price was A’s impecuniosity. Indeed, the very reason A asked B to do the work was because the building work was too expensive. This may indicate that A’s breaking off the negotiations was not brutal but rather predictable, in which case there is no fault to give rise to tortious liability.

The remaining avenue for B is to make a claim de in rem verso on the basis of enrichissement sans cause. Such a claim is traditionally considered subsidiary5 in French law and can thus only be made if all other legal grounds are excluded.

The legal foundation of enrichissement sans cause has developed as a result of case law following the Cour de cassation’s decisions of 15 June 1892.6 The five conditions of this action are: (i) there must be an enrichment; (ii) a correlative impoverishment; (iii) the enrichment must be unjust, without cause; (iv) the impoverished person must not have a personal interest; and (v) there must be no other cause of action. All these conditions have been developed by case law and academic writers. The fourth condition is also treated under the heading of the impoverished person’s fault (faute de l’appauvri). This notion has been the subject of a recent development in case law which means that the answer to these facts is somewhat uncertain.

On the one hand, it is arguable that it is not necessary to discuss the fulfilment of all these conditions since in particular condition (iv) may well create an obstacle for B’s claim. In the past, case law developed the idea that if the impoverished person acted at his own risk and peril, in view of gaining a personal advantage, he could not make a claim under this head.7 This seems to be precisely the case here, since B ran the risk, in starting the building work without A’s consent as to the terms of the contract, that A would not pay him or even be financially able to pay him for the work done.

On the other hand, recent developments have made this idea more flexible; in particular, a distinction is now drawn between the

5V.P. Drakidis, ‘La subsidiarite´, caracte`re spe´cifique et international de l’action d’enrichissement sans cause’, RTDCiv 1969, 577. But the purely subsidiary nature of the action is in the process of evolving: see Civ 1, 15 Oct. 1996, RJDA 1997, no. 327, 207, RTDCiv 1997, 657, obs J. Mestre; Civ 1, 3 June 1997, JCP 1998.II.10102, note G. Viney.

6Cass Req, 15 June 1892, DP 1892.1.596, S. 1893.1.281, note J.-E. Labbe´.

7See Terre´, Simler and Lequette, Les obligations, no. 975, 4 , p. 901. See also Civ 28 Mar. 1939, Gaz Pal 1939.I, 879; G. Bonet, ‘La condition d’inte´reˆt personnel et de faute chez l’appauvri pour le succe`s de l’action “de in rem verso”’ Me´langes Hebraud (1981), 59ff. See also Com 16 July 1985, obs J. Mestre, RTDCiv 1986, 110; Com 24 Feb. 1987, Bull Civ IV, no. 50, 36; Civ 1, 7 July 1987, obs J. Mestre, RTDCiv 1988, 132.