306 precontractual liability in european private law

If A is a public authority, the consequences are regulated by the Procurement Act (PA).125 The PA is based on the EU Directive on Public Procurement. However, Chapter 6 of the PA contains rules on procurements that do not exceed the financial thresholds given in the EU Directive. According to Chapter 6 §12 of the PA, a public authority must accept the most favourable or lowest bid. If no decision is made in the public statement between these two models, bidders cannot generally claim to have a bid accepted because it is the lowest. In this case, A has undertaken to accept the lowest bid. When failing to do so, B is entitled to damages if its bid should have been accepted. The damages in a case of this kind should normally amount to the expectation interest.126

Switzerland

Where B’s bid was the lowest, A is liable.

The public bidding is normally not an offer but an invitation to make offers (invitatio ad offerendum). The invitation does not restrict the freedom of contract.127 Liability can arise if the party organising the bidding has from the beginning no intention to realise the construction or the intention to award the contract to a specific person. Then it has violated its duty to negotiate in good faith and hence has to compensate the participating party for the expenses it has incurred (negative interest).128 The same liability applies if the party organising the bid-

ding does not follow the rules of the bidding and the participating party had a real chance to get the contract.129 But the organising party is not

liable if it does not award any contract because it has changed its mind on the project.

The public bidding can also be organised as a competition (Wettbewerb) or a similar procedure that leads to an obligation to contract (Kontrahierungszwang).130 The prerequisites of this exceptional legal

125Lag om offentlig upphandling (1992:1528).

126NJA 1998.873, where the expectation interest was awarded when a municipality did not follow the rules in Ch. 6 PA by not accepting the lowest bid. Cf. also prop. 1992/

93:88, 46 and Nils Wahl, ‘Offentlig upphandling och skadestand – reparation, prevention eller ingendera?’, JT 1997–98, 619–625. Cf. NJA 2000.712.

127BernerKommentar-Schmidlin, OR 8 n. 64. Cf. Merz, Vertrag und Vertragsschluss, n. 213ff.

128Zu¨rcherKommentar-Scho¨nenberger/Ja¨ggi, OR 8 n. 29; BernerKommentar-Schmidlin, OR 8 n. 65; Gauch, Der Werkvertrag, n. 490.

129Gauch, Der Werkvertrag, n. 492ff.

130Zu¨rcherKommentar-Scho¨nenberger/Ja¨ggi, OR 8 n. 31; Gauch, Der Werkvertrag, n. 495, n. 514.

situation are met in the present case. A has proposed to assess all bids according to specific rules and to give the contract to the lowest bidder. A has thus promised to follow the rules for the public bid. For this kind of competition or a similar procedure the special provisions for an offer of prizes apply.131 The performance consists in making an offer. The compensation or the prize consists in accepting the offer of the winner and in awarding the contract.132 If the person organising the competition does not follow the rules it is liable on the ground of a contract in respect of a legal transaction (Rechtsgescha¨ft).

In both alternatives of situation (i), A has not followed the rules. Hence, it must compensate B’s expectation interest because B would have won the competition if A had not violated its duties.133 However, B has no claim for specific performance because A can, in its capacity as principal, withdraw at any time from the contract as long as it pays compensation for the work already performed and gives a full indemnity to the contractor.134

Where B’s bid was not the lowest, A is not liable. B would not have won the competition and would not have been awarded the contract even if A had performed its duties. Hence there is no causal link between the damage and the violation of A’s duty. Liability can only arise if A had the intention to give the contract to C from the beginning. It then has to compensate B’s negative interest, that is, the expenses incurred by B.

These rules apply also if a public authority organises the public bidding.135 In addition, special statutes for procedures on awarding contracts upon public tenders apply.136 Some of these statutes have rules for special legal remedies and for liability.137

131OR 8 I: ‘Whoever offers a prize or a reward as compensation for a performance is obligated to pay such compensation in accordance with his announcement.’ Cf. Zu¨rcherKommentar-Scho¨nenberger/Ja¨ggi, OR 8 n. 31.

132Zu¨rcherKommentar-Scho¨nenberger/Ja¨ggi, OR 8 n. 31; BernerKommentar-Schmidlin, OR 8 n. 40ff.

133Zu¨rcherKommentar-Scho¨nenberger/Ja¨ggi, OR 8 n. 58, 60; Gauch, Der Werkvertrag, n. 496.

134OR 377. 135 See Gauch, Der Werkvertrag, n. 470ff.

136E.g. Federal Act on Public Procurement of 16 Dec. 1994 (Bundesgesetz u¨ber das o¨ffentliche Beschaffungswesen); Federal Act on the Common Market of 6 Oct. 1995 (Binnenmarktgesetz).

137Cf. Gauch, Der Werkvertrag, n. 500ff.

308 precontractual liability in european private law

Editors’ comparative observations

This case raises a common situation: a general public invitation for tenders for a construction project, where a bidder (B), whose bid is not accepted, makes a claim based on defects in the conduct of the employer (A) in receiving and processing the bids. In order to simplify the case, it has been assumed that A has undertaken expressly to give the contract to the lowest bidder: as several reporters noted, this is perhaps not a usual situation since the concept of the ‘lowest’ bid is itself not straightforward, quite apart from the fact that in practice an employer may normally seek to reserve the right to select amongst the bidders. However, on that simplified set of facts, the jurisdictions are almost unanimous in giving B a remedy in the case where its bid was the lowest; and in rejecting its claim where its bid was not the lowest. However, the reasons (and the remedies, where granted) are not always identical. Reporters were asked also to consider whether it made a difference if A was a public authority; and again the results are not entirely the same.

Where A is a private company inviting the bids, and B’s bid was in fact the lowest (but was not accepted) all jurisdictions except for France find A liable both in the case where A’s fault is an administrative failure within its organisation, and in the case where A had always intended to give the contract to a third party (C). France just doubts whether B has a contractual right to have its bid accepted and (if not) whether A is sufficiently at fault to give rise to delict liability, where the fault is the administrative failure. The reasons given by the several jurisdictions vary, as too does the remedy (although these two variations amongst the jurisdictions are not necessarily linked). Some find that A’s liability is in contract, the contract being formed by the invitation to submit bids together with the submission of the bid itself. The contractual analysis is applied by Denmark (which also has specific statutory rules for public tenders, requiring A to accept B’s tender in these circumstances), England, Finland (which has detailed provisions resulting from self-regulation of the building industry directly relevant to this case), France, Ireland, Italy, the Netherlands, Norway, Scotland, Spain, Sweden and Switzerland. Amongst these, France, Italy, the Netherlands and Switzerland also analyse the case in the alternative as one of precontractual liability or delict (and England and Scotland consider that the fraudulent invitation of bids by A, knowing that it would always give the

contract to C, also gives rise to a tort/delict claim); and all the other jurisdictions simply hold A liable in precontractual liability (culpa in contrahendo) or delict (Austria, Germany, Greece and Portugal). The remedy also varies. Ireland, the Netherlands, Norway, Spain and Sweden, which analyse the case as one of contractual liability, consider the possibility of B obtaining a court order for specific performance of A’s promise to give it the contract. As usual, the Netherlands is alone able to contemplate this strongest remedy even if the claim is in precontractual liability (‘third stage of negotiations’) rather than contract. These, and some of the others which follow the contractual analysis, award expectation damages, to reflect not simply B’s expenses of the bid but also its lost profit on the contract which should have been awarded to him. Others would award only damages to cover B’s reliance losses. There is not, however, an exact correlation between the contract claim and expectation damages. For example, Austria, Germany and Greece consider that the expectation measure might be awarded in the claim based on culpa in contrahendo; whereas Denmark awards only reliance damages in the contract claim and Scotland awards expectation damages in situation 1(a), but reliance damages in situation 1(b). In deciding whether to award the loss of the profit on the contract (expectation measure) some jurisdictions are influenced by the degree of blameworthiness on A’s part, in particular, in the situation where the bidding procedure was fraudulent from the start.

Where B’s bid was not the lowest but its bid was not considered as a result of administrative failure, all agree that whatever A’s responsibility (in contract, delict or precontractual liability) might have been for the administrative failure, its misconduct did not cause any loss to B whose expenditure would always have been wasted. As some reporters point out, this would have been otherwise if the facts on this point had included the situation where the bidding had always been fraudulent, since that would be sufficient to show that all B’s expenditure was from the beginning wasted: whether or not the bid was the lowest, the size of its bid was always irrelevant.

In the case where A is a public authority, the situation is generally unchanged in result, although the reasoning varies. All jurisdictions (at least those in the European Union) have similar rules based on the EC Directive on public procurement, although it was perhaps unlikely that the project described in the case would fall under the minimum

310 precontractual liability in european private law

threshold value of the Directive.138 However, some jurisdictions have extended the EC rules to cover also lower value projects. And some have other special rules governing public invitations to tender made by public authorities which provide other possible remedies for a party such as B, for example, to have the bidding annulled (France, Greece, Portugal, Spain). Some (Austria, France, Greece and Italy) note particularly that the status of A as a public authority introduces a requirement of equal treatment between bidders which therefore opens up a possibility of B’s claiming discriminatory treatment as a ground of invoking annulment or other remedies.

138It should be noted that during the period of final drafting of the reports in this volume, the several Member States were in the course of implementing Directive 2004/18/EC; some reports therefore refer to the newly implemented Directive, others to the earlier Directives which it replaced. This detail is not, however, significant for the purposes of this work.