Document Type

Article

Disciplines

International Law

Abstract

This paper will examine a theory of precontractual liability known as culpa in contrahendo, which can be translated as "fault in the negotiation process." The essence of the doctrine is as follows: When two parties bargain in order to enter a contract, and a contract is not consummated, one party may suffer damages due to the expenditures he made in preparation to enter the agreement. When one of the parties, through blameworthy conduct, prevented the contract from coming into force, he should be liable for the expenses of the other.

Such would be the case if a homeowner wanted to build an addition to his house, and asked a builder to come inspect his land, take measurements, examine wiring, plumbing, etc., and then the two could not agree on a price for the contract. Assuming that neither party had expressly agreed to absorb the cost of the builder's time and efforts in preparing an estimate for the construction, there would be a question of who should be responsible for the expenses incurred by the builder in preparation for the construction contract.

Now assume that the builder discovers that the homeowner never intended to add an addition to his house, or that he learns that the homeowner is very low on funds and could not afford to do any construction at this time. In this instance, culpa in contrahendo may be employed. Here, there is an example of "fault" in the negotiation process. When the homeowner had no serious intent of contracting, or was financially unable to do so, and caused another party to incur expenses in the good faith expectation that a contract was forthcoming, the party who caused such injury should be liable to his "co-contractant."

In the present American law, there is no adequate remedy for the situation between the homeowner and the builder. The homeowner has not committed any tort. Nor is there a contract remedy for the builder, since there never was a contract between the parties. Even the Uniform Commercial Code (hereinafter "U.C.C.") does not provide a solution, since the case is not one for a sale of goods, and the duty to perform in good faith does not arise until after formation of a contract.

This paper will discuss the doctrine of culpa in contrahendo and show why it should be adopted into American jurisprudence. First, the paper will discuss the origins of culpa in contrahendo and its adoption in other countries, especially in the civil law countries of Germany and France. Following this discussion of civil law, the analysis will compare common law approaches to the same problem. It will examine current law in detail and show that doctrines such as §90 reliance, misrepresentation, and fraud do not adequately deal with precontractual liability and do not address the issue squarely, nor remedy the situation in the most reliable and efficient manner. The third section of the paper examines substantive American case law, in which courts tortuously achieved their desired results, through straining and convoluting existing jurisprudence, whereas had they possessed the doctrine of culpa in contrahendo, the judicial decisions would have greater precedential value since future litigants would have a reasonable expectation of how their cases might be determined. Finally, the paper suggests to the American judiciary and legislatures the many areas of the law in which the doctrine may be utilized in resolving disputes concerning precontractual liability.

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