For bad faith negotiations company may be sued
Jan, 23 2018
Since 2015 Russian legislation has established liability for bad faith negotiations. However, judicial practice has not formed a clear perspective on this issue. Even unfair withdrawal was not considered to have bad faith. Perhaps, that is why such liability type has never been the case, until recently.
At present, it has changed. In one of the latest court’s decisions a company was brought to liability for unfair withdrawal from negotiations. The company planned to rent a warehouse and the negotiations lasted for 8 months. During that time, the owner of the facility refused to other rental requests. However, after the text to the contract was negotiated, the potential lessee broke contact. The court found these actions to be unfair and ruled to enforce the loss of profit at amount of over 15.5M rubles (250.000$) to the landlord.
To avoid these kinds of situations we recommend considering the practice of liability of this kind or signing an agreement on modalities for negotiations. The agreement must provide for the refusal procedure conditions as well as other negotiations aspects.