268 precontractual liability in european private law

It is not clear whether B has a free choice between the available claims. In the relationship between invalidity and breach of contract sanctions, there is a tendency to give the latter prevalence. However, there is no theory with respect to the relationship between precontractual and contractual liability.

Portugal

B is only entitled to restitution based on A’s enrichment, on the ground of accessio, and only if A decides to keep the building.

B is not entitled to compensation under the rules of precontractual liability, as A has fulfilled his duty to warn imposed by the good faith principle under article 227 of the Civil Code. In fact, A has made perfectly clear that he cannot see how he would be able to afford the normal, full costs of having the house built. Although he has proposed a better price, B should not have initiated the building work. If he does so, A can reject the construction and even ask for its demolition. However, if he intends to keep the building he would have to pay B the value of his enrichment.30

The claim for unjust enrichment is based on an objective valuation which has no relation to the proposed price of the construction, so the valuation can result in an amount higher or lower than the contract price.31 However, A could invoke his subjective valuation as a defence.32

Scotland

A is liable to B in unjustified enrichment, the relevant Scots remedy being that of recompense. The measure would be quantum lucratus est A, that is to say the extent to which A has been enriched by the services provided to him. Although the building works have acceded to A’s land and hence are owned by him, B has a personal claim for recompense against A. It might be arguable that A was not enriched by having a halfbuilt house on his land which he cannot afford to complete. It is highly unlikely that a contract would be implied here, and there seem to be no grounds to argue for any delictual liability. Nevertheless, in the case of

Avintair Ltd v. Ryder Airline Services Ltd,33 a contract for the supply of

30 Article 1341 CC. See Leita˜ o, O enriquecimento sem causa no Direito Civil, p. 693ff.

31 Article 473, no. 1 CC. 32 Article 473, no. 2 CC.

331994 SC 270. See also Robertson Group (Construction) Ltd v. Amey-Miller (Edinburgh) Joint Venture [2005] CSOH 60.

services was held to exist despite dissensus as to the price, the services in question having been completed despite the disagreement. The recipient was thereupon required to pay a reasonable price for the services received.

A’s liability in enrichment law is the extent to which he was enriched; in the case of an implied contract, it is to the extent of a reasonable price (and there is no cumulation of these remedies). It is unlikely that B could obtain an order of specific implement requiring A to accept completion of the building work.

Spain

According to Spanish case law and academic writing, A is liable to B based either in precontractual liability (tort) or in restitution, but not in contract as there has not been any concluded contract yet, especially since the price has not been agreed.

But the four conditions for precontractual liability,34 established by writers and case law, are satisfied. First, there is a special situation of confidence between A and B, not only because A and B are friends, but also because A does not protest against B’s starting building after having offered a contract with special terms. The reason A gives for breaking off negotiations probably does not justify his behaviour as, acting according to good faith, he is supposed not only to know his personal financial possibilities and limits, but also to communicate this fact if B starts executing a contract, considering that the price offered is not completely beyond A’s financial possibilities. The damages B suffers are his expenses and include probably a normal remuneration, being limited by the amount B expected to receive (lucrum cessans).

The other basis of A’s liability would be restitution (gestio´n de negocios ajenos, article 1893 of the Civil Code; or enriquecimiento injusto, article 1887). According to case law, the conditions for liability based on unjust enrichment are benefits obtained by one party; losses suffered by the other party, either as positive loss or as a gain that has not been obtained; and the lack of a causa justa (valid legal justification). As it is not certain that A did obtain a benefit by having an almost finished (but not completely and therefore not usable) house built on his land, this doctrine seems not entirely suitable, although in a similar case it has

34Dı´ez-Picazo, Fundamentos del Derecho Civil Patrimonial, pp. 278, 279; STS, 14 June 1999, RJ 1999\4105.

270 precontractual liability in european private law

been applied by the Spanish courts.35 As the existence of an almost finished house adds value to the land, it has to be admitted that A is richer than before. Therefore he is liable on the basis of article 1893 even if he did not explicitly ask for the house to be built, as he did not object to the building work. On the basis of this article, he is liable for the expenses B incurred, including the time B spent doing the building works.36

Sweden

It is highly probable that a contract has been concluded. A is then obliged to pay for the house at a price that should be determined by taking into consideration the usual market price and what has been stated by the parties regarding the price in the negotiations. If a contract is considered not to have been concluded, A’s behaviour could be interpreted as an agreement to compensate B for his costs incurred during the period until the discontinuation of the negotiations. In any case, A’s behaviour in not speedily making up his mind could be regarded as culpa in contrahendo and A must therefore compensate B for the costs B incurred during the delay.37

B is taking a risk if the parties do not reach an agreement. As A owns the land he is bound to know about B’s work proceeding. Contracts are formed when the negotiating parties have reached consensus. Usually an agreement is reached when the parties’ expressed intentions correspond. A contract might very well be formed in other ways, for example from the behaviour of the parties. Subsequent behaviour may retroactively shed some light on the intention of the parties at an earlier point of time. The failure to object when there is reason to believe that the other party by mistake believes that the contract has been or will be entered into may give rise to a valid contract either by interpreting the inactivity as an expression of intent or on the basis of

35Audiencia Provincial de Badajoz, 15 June 1999, no. 265/1999, AC 1999\1286; cf. STS, 31 Oct. 1986, RJ 1986\5824.

36There can be a problem with this liability if the expenses were higher than the price B suggested. In that case, A should only be liable for the amount suggested, as this was the value B estimated.

37Hellner, Om obeho¨rig vinst. Sa¨rskilt utanfo¨r kontraktsfo¨rhallanden; Karlgren, Obeho¨rig vinst

och va¨rdeersa¨ttning; 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; J. Ramberg, ‘Pre-contractual Liability according to Swedish Law’ in Hondius,

Precontractual Liability; Ramberg and Ramberg, Allma¨n avtalsra¨tt.

the inactivity as such.38 A contract of sale could well arise, although there is no agreement at all on the price.39

A’s passive behaviour in not protesting against the initiation of the construction work, and his consent to B’s access to the land, are important factors when determining whether a binding agreement existed or not, which would probably lead to the conclusion that the parties had concluded a binding contract. In this case, the price has to be determined by considering the normal market price and B’s expressed willingness to undertake the obligations on favourable terms.

If a contract was not concluded, A might be liable in damages for culpa in contrahendo. A was aware of B’s efforts and he did not make it clear to B that no contract had yet been concluded. He also gave B access to the land. Even if no contract was concluded, A’s behaviour could be interpreted as his consent to compensate B for the costs incurred until the decision to conclude a final agreement was reached. These circumstances might constitute liability according to which A has to compensate B for his incurred costs for the work undertaken until A informed B about his decision.40 A party has an obligation to inform the other party without delay as soon as it is clear that a final agreement will not be concluded.41 It is not clear from the facts in the case whether A is late when he breaks off the negotiations. If A was aware of his financial limitations already at an early stage of the negotiations and of the approximate price range for the construction, he should have acted without delay and in good faith to make up his mind about the agreement.42 Yet he did not object until the house was almost finished. Therefore he might be liable for the costs incurred by B during his delay in making up his mind.

B might also base a claim on the principle of unjust enrichment. This principle is, however, very rarely applied as an independent ground in Swedish law.43

Switzerland

A is not liable on the basis of a contract because the parties have not agreed on the price. The price was apparently an essential condition for the agreement.

38Ramberg, ‘Precontractual Liability according to Swedish Law’, above n. 37.

39Sale of Goods Act 1990, s. 45.

40 NJA 1978.147. 41 NJA 1990.745. 42 NJA 1978.147.

43Hellner, Om obeho¨rig vinst. Sa¨rskilt utanfo¨r kontraktsfo¨rhallanden; Karlgren, Obeho¨rig vinst och va¨rdeersa¨ttning.

272 precontractual liability in european private law

For the same reason as in case 8, A is not liable on the basis of culpa in contrahendo for the break-off of the negotiations. In addition, it is doubtful whether A is liable for negotiating in bad faith. He can hardly be blamed for not informing B in exact terms about the price limit although he could recognise the possible loss to B. On account of A’s statements, B should have informed himself about the financial possibilities and the price limit. To decide otherwise would only be appropriate if A had so little money that the price must obviously have been outside of the wide range of a friend’s offer.

However, A is liable under special provisions within the chapter on property law of the Swiss Civil Code.

Where one person builds with his materials on another person’s land, the materials become an integral part of the land.44 In the present case A becomes the owner of the half-finished building and therefore he is unjustly enriched. However, the general rules on restitution of unjust enrichment45 are replaced by the special provisions on buildings on the land of another.46 Under certain circumstances the (former) owner of the materials can require that they be removed at the builder’s expense. In the present case B has no claim for removal because he has built the house himself, and therefore the materials have been used with his consent.

Where the materials are not removed from the land, the owner of the land is bound to pay reasonable compensation for them.47 The extent of the compensation depends on the good or bad faith of the owner of the materials. If the owner of the materials has built in bad faith, he can claim only that amount of compensation which represents the minimum value of the building to the owner of the land. B has acted in good faith because A knew that B has started the building work on his land and did not protest against this work.48 B can therefore claim reasonable compensation. This means – against the wording of the provision – that the judge has to consider not only the value of the materials but also the other costs of the building.49 A has also to pay compensation for B’s work, at least to the extent of the added value of the land.50

If the value of the building clearly exceeds that of the land,51 the party who has acted bona fide can require that the ownership of the land

44 ZGB 671 I. 45 OR 62ff. 46 ZGB 671ff. 47 ZGB 672 I, III.

48BernerKommentar-Meier-Hayoz, ZGB 672 n. 6.

49BaslerKommentar-Rey, ZGB 672 n. 7.

50BGE 95 II 228; BGE 82 II 290; BernerKommentar-Meier-Hayoz, ZGB 672 n. 9.

51The Federal Court has applied this rule in a case (in 1955) where the value of the land was CHF 600 and the value of the building was CHF 14,500 (BGE 81 II 274).

274 precontractual liability in european private law

enrichment, although significant differences between the jurisdictions on the principles (or, in some case, the lack of them) for unjust enrichment then throw up different answers for this analysis (see, for example, the very different discussions of unjust enrichment in the English, French, Dutch, Scottish and Spanish reports). Some jurisdictions that could find no liability in case 8 are able to use unjust enrichment and hold A liable in case 9: England, Germany, Greece, Ireland and Scotland. But some jurisdictions do not have very clearly developed principles of unjust enrichment (in particular, see the Norwegian and Swedish reports).

Austrian and Swiss law take a quite different approach: they have in their codes special provisions which cover the case of building on the land of another, and which override the general rules of unjust enrichment.

A few reporters consider that in this case the most likely claim – or, at least, a possible claim (by contrast with case 8) – is in contract. They appear to be more favourably disposed to interpret the dealings between the parties, and in particular the fact that A has admitted B onto his land to begin the building works, as evidencing an agreement between them for the works to be done, and will fill by a reasonable implication the gap in the negotiations left by the disagreement over price. This approach is taken by the Irish, Norwegian and Swedish reporters, and is considered by the French, Dutch and Scots reporters but thought unlikely on the facts. The Danish reporter considers that the fact that this is a transaction between friends may negative liability.