Pre-contractual liability of the parties

Feb, 25 2020

Responsibility for dishonest withdrawal from negotiations exists in most countries of continental Europe, but in Russia such responsibility appeared with entry into force of Art. 434.1 of the Civil Code. Nevertheless, at the moment, law practice on recovering losses related to unfair negotiation is quite rare.

Party that interrupts negotiations to conclude contract in bad faith is obligated to compensate other party for losses caused by this. In this case, complainant has burden of proof that, entering into negotiations, defendant acted in bad faith with the aim of harming complainant. For example, defendant tried to obtain commercial information from plaintiff or to prevent conclusion of agreement between plaintiff and third party.

The court on its own initiative, without justified statement by any of participants, may bring up for discussion circumstances that speak of dishonesty in negotiations.

The Civil Code establishes open list of criteria for dishonesty in negotiations, if one of them is identified, the court has right to directly apply rules for compensation for losses resulting from abuse of right. In most of these cases, the courts justified the refusals, citing the unproven unlawful conduct of defendant in the negotiations.

In the Decree of the Supreme Court of the Russian Federation No. 305-ES19-19395 dated 29.01.2020 stated that for pre-contractual liability to occur, two conditions must exist in combination: unjustified termination of negotiations and existence of circumstances in which other party to negotiations could not reasonably expect their termination .

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