ABSTRACT
Market entry often begins before the parties create an enforceable contractual relationship. During negotiations, firms may incur territory-specific costs, disclose commercially sensitive information, reorganize operations, or abandon alternative opportunities in reliance on a prospective transaction. When negotiations fail, the legal problem is not whether the disappointed party should obtain the expected benefits of the unmade contract, but whether the negotiating process has shifted identifiable commercial risks in a way that private law should recognize. This article examines pre-contractual liability in European private law through the problem of market-entry risk. It considers the development of culpa in contrahendo, national approaches to good faith and reliance, and the treatment of pre-contractual obligations under Rome II. The analysis shows that European law increasingly recognizes the negotiation stage as a legally relevant relationship without converting it into an obligation to conclude the contemplated transaction. The article develops a reliance-based approach to liability arising from market-entry negotiations. Liability should arise where one party induces transaction-specific expenditure, forbearance, or disclosure while its conduct no longer corresponds to the actual state or purpose of negotiations. The appropriate remedy should remain directed at losses caused by that reliance rather than profits expected from the transaction itself. This approach preserves freedom of negotiation while addressing strategic use of the bargaining process to transfer market-entry costs to another party.
Nemcova, Afelia, Reliance and Market Entry in European Pre-Contractual Liability (December 13, 2021).
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