Perhaps everyone is aware of the existence of contractual liability, but very few are aware of the existence of pre-contractual liability. The roots of pre-contractual liability can be found in Roman law. In the Czech Republic, the issue of pre-contractual liability was initially perceived in the last century, when it was an unwritten institute, i.e. not expressly regulated in the law. It was only with the new Civil Code effective from 1 January 2014[1] that pre-contractual liability was explicitly enshrined in the Czech legal system.
Pre-contractual liability is based on the general duty to act honestly. Specifically, the Civil Code distinguishes 4 basic facts (or cases) of pre-contractual liability:
I. Negotiations for the conclusion of a contract without the intention to conclude it
This is a situation where a party negotiates to conclude a contract without intending to conclude it. That is to say, they are negotiating a contract only 'on the surface'. It is irrelevant whether the intention to conclude the contract was already absent when the negotiations began or only subsequently.
II. Breach of the duty to provide information
This is a general duty of information which applies to the conclusion of any contract, irrespective of the type of contract. That duty of information is aimed at ensuring that the parties communicate to each other everything essential for the conclusion of the contract before it is concluded. Relevant information is information the absence of which could misrepresent the other party, i.e. information which affects his interest in concluding the contract. This does not have to be information relating only to the subject matter of the contract (e.g. the purchase of a car), but also information relating to legal circumstances (e.g. legal impediments to disposal)[2].
III. Termination of contract negotiations without just cause
At first glance, this offence may appear similar to the first. However, the similarity is really only superficial. The main difference is that, in order to constitute a case of termination of negotiations for the conclusion of a contract without just cause, the conclusion of the contract must have appeared highly probable. This occurs, for example, in a situation where everything has already been agreed between the parties regarding the contract, written down, and the other party, without just cause, changes his mind immediately before signing the contract and does not sign (does not conclude) the contract.
Many of you will wonder what constitutes a just cause for not concluding the contract even when the conclusion of the contract seemed highly probable. A just cause may be, for example, a change in the solvency (i.e. ability to pay) of the other party or a change in circumstances due to a fire at the premises, but it cannot be a mere change in the market or a more favorable competitive offer.
IV. Misuse or disclosure of confidential information obtained during contract negotiations
The last offence applies to situations where the counterparty not only fails to conclude the contract but also misuses or discloses information acquired in the course of the contract negotiations without a lawful reason.
An example would be the sale of an e-shop where the buyer is normally interested in customers, suppliers, technical solutions, etc. and it is in the seller's interest not to misuse or disclose this information, for example when setting up another e-shop.
Consequences of breach of pre-contractual liability
If one of the above-mentioned facts is fulfilled, the injured party is entitled to compensation for damages and any lost profits. That is, not only what he actually lost, but also what he would have earned if the breach of pre-contractual liability by the other party had not occurred. In the case of misuse or disclosure of confidential information obtained in the course of contract negotiations, the third party is still obliged to pay the party whose information was misused or disclosed what the party who misused or disclosed the information has gained. This obligation does not exclude the obligation to pay damages.
Conclusion
In conclusion, pre-contractual liability is a complex institution. Since almost no negotiation proceeds in the same way, it is important not only to assess each situation individually, but also to bear in mind that precontractual liability exists and that its breach has consequences.
[1] In the provisions of Sections 1728 to 1730 of Act No. 89/2012 Coll., Civil Code, as amended.
[2] HULMÁK, Milan et al. Civil Code V. Contract law. General part (§ 1721-2054). 1st edition. Prague: C. H. Beck, 2014, p. 50, marg. no. 21.
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