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Spain

In Spanish law, there are no formality requirements for the validity of a contract for the sale of land.72 Therefore, B can demand that the necessary formalities are entered into for the transfer of the property, that is, that the public document is written,73 if he can prove the first agreement.

If A knew of the formality requirements, or (being a professional) was supposed to know them, or even misled B about them, he would be liable in tort (culpa in contrahendo), as he negotiated in bad faith if he consciously concluded an invalid contract. His behaviour can even be qualified as abuso de un derecho,74 which would provide another ground for his liability.

Sweden

A is not liable to compensate B, probably not even if he knew of the formality requirements (situation (i)). A might be liable to compensate B if he misled him (situation (iii)), but this is uncertain. If A is a professional (situation (ii)) his responsibility could be regulated in special legislation or ethical norms and hence there might be liability.75

Due to the form requirements for sales of real estate (the agreement has to be in writing and contain, inter alia, a declaration by the seller that the ownership of the property is transferred to the buyer), there is some uncertainty as to whether culpa in contrahendo may constitute liability. Neither party is bound by an agreement for sale of real estate until it fulfils the form requirements. In NJA 1973.175, where the parties were negotiating a sale of real estate and where the owner incurred costs for changes of the property in accordance with the wishes of the prospective buyer, the Supreme Court found that the latter could not be liable ‘only because of the promise to buy the property’. Due to the principle of iuris ignorantia nocet, B bears the risk of his lack of knowledge about the requirements as to form and therefore A is not liable for damages. It does not make any difference whether or not A, as in (i), knew about the formal requirements at the time when the parties

72STS, 16 May 1996, no. 401/1996, RJ 1996\4348.

73Article 1279 CC. 74 Article 7.2 CC.

75 Grauers, Fastighetsko¨p; Hellner, Kommersiell avtalsra¨tt; 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; Ramberg and Ramberg, Allma¨n avtalsra¨tt.

reached the agreement not complying to the requirements as to form. In situation (ii), where A is a professional and B is a non-professional (consumer), the result would be the same: no damages would be awarded. Everyone, even consumers, should know about the rules on form regarding sales of real estate. Therefore, A would not be considered to have been acting against the requirements of good faith by reaching an agreement without mentioning that the parties are not bound by the agreement until the form requirements have been fulfilled.

If B raised the question of the formality requirements and A misled him about them, A might be considered to have been acting negligently, as he thereby at least gave B reasonable grounds to act on the assumption that the contract was concluded and binding, regardless of the form requirements. If he therefore regarded the sale as completed and paid the estate agents’ fees, he is entitled to compensation for these costs, as they were incurred in reliance on the statement made by A. B is also entitled to damages for any other costs incurred in reliance on the statement. In some instances, B would probably be entitled to damages also for losses he made by relying on A’s statement in such a way that he did not buy another property which he could have bought at the time. However, B is not entitled to damages for the costs he will incur in the future in trying to find a new, alternative property.76

Switzerland

The lack of formality generally prevents a contractual claim for specific performance or the expectation interest. According to OR 11 II the contract is not valid. In Swiss law there is no provision that the lack of formality can be cured by special acts of performance (for example, the transfer of the property).

It depends on the circumstances whether A is liable on the ground of culpa in contrahendo in situation (i). If a party knows the lack of formality and does not inform the other party, he might be liable on the ground of culpa in contrahendo. Although there is no specific provision in Swiss law, the liability is acknowledged by academic writing and the courts.77 The defendant has to compensate the negative (reliance) interest.

76Herre, Ersa¨ttningar i ko¨pratten. Sa¨rskilt om skadestandsbera¨kning, p. 304ff. and NJA 1963.105.

77Zu¨rcherKommentar-Scho¨nenberger/Ja¨ggi, OR 11 n. 94ff.; BernerKommentarSchmidlin, OR 11 n. 186ff.; BaslerKommentar-Schwenzer, OR 11 n. 28ff.; Loser,

Vertrauenshaftung im Schweizerischen Schuldrecht, nn. 540ff.; BGE, 8 June 1998 no. 4C.447/ 1997 (in SemJud 1999, 113ff.), E. 3.

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However, there is no general duty to disclose because each party has to inform himself about the prerequisites for a valid contract. Academic writers thus demand that the defendant knew or should have known the lack of formality and the error of the other party.78 Moreover, the plaintiff must have relied on the validity in good faith. If he acted negligently the judge may reduce or exclude liability because of his concurrent responsibility.79 If both parties have the same fault, liability is also excluded.80

It also depends on the circumstances whether A is liable on the ground of culpa in contrahendo in situation (ii). If a party is negotiating with a professional (a person concluding contracts on the sale of houses by profession), he is entitled to rely on the disclosure of formality requirements. A is hence liable on the ground of culpa in contrahendo if he knew the lack of formality. He has to compensate the expenses incurred by B. Moreover, the party can expect the professional to inform himself about the formality requirements. He is therefore liable for negligence even if he did not know the lack of formality.81 Earlier court decisions have, however, denied a duty to inform oneself.82 These days it is not clear whether the Federal Court would keep to the old ruling in view of the criticism by writers.

A is liable on the ground of culpa in contrahendo in situation (iii). In case of wilful deception about the formality requirements, the defendant is liable and has to compensate at least the negative interest. According to writers the party committing the wilful deception has to compensate even the expectation interest in two cases: if it is proved that the contract would have been concluded in case of due disclosure;83 and if the fault of the defendant is serious and equity requires compensation of further loss.84 Some authors are even more favourable to the plaintiff

78BernerKommentar-Schmidlin, OR 11 n. 188; Zu¨rcherKommentar-Scho¨nenberger/ Ja¨ggi, OR 11 n. 96; A. Koller in Koller, Der Grundstu¨ckkauf (1st edn), no. 370; Gauch, Schluep, Schmid and Rey, Schweizerisches Obligationenrecht Allgemeiner Teil, vol. I, n. 583; Schmid, Die o¨ffentliche Beurkundung von Schuldvertra¨gen, n. 835ff.

79BernerKommentar-Schmidlin, OR 11 n. 190. 80 BGE 106 II 42.

81BernerKommentar-Schmidlin, OR 11 n. 189; BaslerKommentar-Schwenzer, OR 11 n. 28; Koller, above n. 78, n. 370 footnote 177.

82Vgl. BGE 68 II 237; BGE 106 II 42.

83BernerKommentar-Merz, ZGB 2 n. 498; BernerKommentar-Schmidlin, OR 11 n. 195; Loser, Vertrauenshaftung im Schweizerischen Schuldrecht, n. 542. Contra, Schwenzer, Schweizerisches Obligationenrecht Allgemeiner Teil, n. 31.43.

84Zu¨rcherKommentar-Scho¨nenberger/Ja¨ggi, OR 11 n. 96; Merz, Vertrag und Vertragsschluss, n. 449; Koller, above n. 78, n. 372f.; Loser, Vertrauenshaftung im Schweizerischen Schuldrecht, n. 543. Compensation for further loss is an express rule in

and award a claim for specific performance, that is, a claim for transfer of the property.85 The Federal Court has so far refused specific performance as long as the contract has not been performed even in part.86 The courts, however, award specific performance (for the rest) if the contract has been performed for the most part.87 In this situation it is not even necessary that the party has committed a wilful deception. And the plaintiff is entitled to compensation in the expectation interest even if he knew88 the lack of formality.89 There is a serious dispute about the ground for the liability. Courts and some academic writers mostly base the liability on the general principle of abuse of right (Rechtsmissbrauch),90 other writers will not apply the formality rule at all,91 and the Federal

Court has recently used the concept of liability based on reliance.92

Editors’ comparative observations

In this case, there is at first sight a significant difference between the jurisdictions, although much of this can be put down to their different approaches to the particular context (a contract for the sale of land) and its formality requirements. Some reporters have difficulty analysing this case because the starting point (a land contract which fails for lack of formality) does not hold for their country. For example, the Danish, French, Norwegian and Spanish reporters begin by observing that there is no formality requirement for such a contract, and therefore either dismiss the case as unreal, or vary the facts to imagine how their system would answer the case if there were a failure of formality, or, more simply, answer on the basis that there is, in fact, a simple liability here in contract.

The much more interesting aspect of the reports is the way in which the several systems analyse the responsibility of parties to a contract

other provisions of culpa in contrahendo liability (cf. the Swiss report on case 1); this rule is also applied by analogy if a party has wilfully been misled about the form requirements (cf. CommRomand-Guggenheim, OR 11 n. 29; Gauch, Schluep, Schmid and Rey, Schweizerisches Obligationenrecht Allgemeiner Teil, vol. I, n. 557).

85A. Koller in Koller, Der Grundstu¨ckkauf (2nd edn), n. 35ff.; contra, BernerKommentarSchmidlin, OR 11 n. 195.

86BGE 104 II 101f. 87 BGE 116 II 702; BGE 112 II 112.

88In many cases the parties declare a lower price for the house in the public deed in order to pay less tax.

89See recently BGE, 7 Jan. 1999 no. 4C/299.1998 (in ZBGR 1999, 387ff.), contrary to the earlier decision BGE 104 II 101.

90BGE 112 II 112. 91 Cf. BaslerKommentar-Schwenzer, OR 11 n. 23.

92BGE, 7 Jan. 1999 no. 4C/299.1998 (in ZBGR 1999, 387ff.). Cf. Loser, Vertrauenshaftung im Schweizerischen Schuldrecht, n. 961 and the Swiss report on case 1.

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which cannot be enforced because of the failure to comply with legal requirements. Some systems take a strong view of the formality requirement, and find that it is generally very difficult to go behind it and to impose a liability where the contractual requirements have not been met. In substance, such systems decline to displace the policy which underlies the formality requirement, although other systems appear to be more open to displacing the policy of the formality, and a consideration of the main case and, especially, the variants to the facts tests the strength of their position. For example, England and Ireland will not normally allow a contractual remedy in a case where the statute provides for a contractual formality which has not been fulfilled, although the English report notes that this stark position is sometimes mitigated by other doctrines: in addition to the law of tort, the doctrine of proprietary estoppel may also operate to avoid the consequences of non-compliance with the formality requirement for land contracts. Proprietary estoppel93 is a doctrine of equity, which provides remedies where it would be unconscionable for the defendant to deny the claimant’s rights where he has encouraged or acquiesced in the claimant’s belief that he has or will have a right in property and where the claimant has acted to his detriment in that belief. This is part of a wider area of English law where the courts have developed remedies to protect those who fail to comply with formalities, and shows that sometimes a statutory formality rule is not as absolute as might appear.94 A not dissimilar, but perhaps simpler, solution is offered by Scotland: a statutory exception to the requirements of writing in contracts for the sale of land, to allow the contract itself to be enforced (or expectation damages to be recovered) by a party who relied materially on the conclusion of the contract. And in Germany (and arguably the Netherlands) A is barred from relying on the lack of formality in the case where he purposely misled B about the requirements, an application of the principle of good faith that resembles the common lawyer’s estoppel. The Netherlands, which, as earlier cases in this study have shown, is generally more open to allowing expectation-measure remedies for precontractual liability,95 could also here award expectation interest damages because the negotiations, even if they were

93See also the English report on case 2.

94J. Cartwright, ‘Formality and Informality in Property and Contract’ in Getzler,

Rationalizing Property, Equity and Trusts, p. 36.

95See the Dutch report on case 1.

assumed not to have reached a concluded, enforceable contract because of the predicated formality requirements, would have reached the ‘third stage’.

Other jurisdictions, too, take contrasting approaches to the importance of the formality and B’s own responsibility for knowing the requirements. Finland, Greece, the Netherlands and Portugal allow the application of the normal rules of culpa in contrahendo, focusing generally on the fact that the negotiations had proceeded to such a late stage before A sought to withdraw from finalising the contract. But Austria, France, Germany, Italy, Norway, Sweden and Switzerland will not allow B a remedy on the basis that A is not at fault, or B is himself equally at fault for not knowing the legal requirements. When, however, the variants are added, there are some changes to these groupings, showing that different jurisdictions are prepared more easily than others to allow their normal principles of precontractual liability to displace the policy behind the failure to fulfil the formality requirements. Austria, France, Finland and the Netherlands hold that A assumes liability in all three variant situations ((i) A’s knowledge of the formality requirements; (ii) A being a professional; (iii) A misrepresenting the requirements), but Germany, Italy and Norway allow a claim only in situations (ii) and (iii), taking the view that it is not sufficient to change the basic position (non-liability) that A knew the requirements. Sweden and (with some hesitation) Switzerland limit the liability to situation (iii), where A has misled B.

Although England and Ireland would not give any remedy on the facts, they still regard variant (iii) as significantly different because the active misrepresentation by A opens up the possibility of a claim in tort (the problem on the facts being the lack of causation of substantial recoverable damage). This is also an additional ground of recovery for Scotland. So again we see that, in the case of the common law jurisdictions, it is a false statement made by A during the course of the negotiations that makes all the difference to the remedies that are available to B.