The problem of precontractual liability

Peculiarity of the precontractual phase

The precontractual phase is difficult to characterise and analyse, in both legal and practical terms.

The negotiating parties have entered into a relationship by virtue simply of their negotiations. So they have begun their journey together. But they are not yet in the relationship – the contract – which is their aim. And they may never reach it. The negotiations may fail; and a failure may come sooner or later. It may become clear very quickly to them both that they will never reach the agreement necessary to conclude the contract. But, equally, it may be only after a lengthy exploration of their respective positions as regards the likely terms of a contract, and perhaps only after further information becomes available from third party sources, or the facts surrounding their negotiations change, that one of them decides that the contract is hopeless; or that a better deal is to be done elsewhere with another party. By then, either party may well have incurred significant expenses, as well as having invested time and effort, towards the hoped-for contract. The break-off of the negotiations may seem inevitable to the parties as they together realise that the contract will never be concluded; or it may come as a shock to one party that the other calls off the negotiations when they were so far advanced, or at least where there was nothing to suggest that they were not likely to lead to their fruition in the contract.