Data
- Date:
- 06-11-2006
- Country:
- Lithuania
- Number:
- 3K-P-382/2006
- Court:
- Supreme Court of Lithuania
- Parties:
- V.Š. vs A.N., A.N.
Keywords
SALES CONTRACT - BETWEEN TWO LITHUANIAN PARTIES - GOVERNED BY LITHUANIAN LAW - REFERENCE TO THE UNIDROIT PRINCIPLES AND THE PRINCIPLES OF EUROPEAN CONTRACT LAW TO INTERPRET APPLICABLE DOMESTIC LAW (LITHUANIAN LAW)
PRELIMINARY CONTRACT - REFUSAL BY ONE OF THE PARTIES TO EXECUTE THE FINAL CONTRACT - PARTY LIABLE FOR DAMAGES COVERING NEGOTIATION EXPENSES AND THE LOST OPPORTUNITY (ARTICLE 6.165 PARA.4 OF THE LITHUANIAN CIVIL CODE; REFERENCE TO COMMENT 2 TO ARTICLE 2.13 (NOW ARTICLE 2.1.13) ("CONCLUSION OF CONTRACT DEPENDENT ON AGREEMENT ON SPECIFIC MATTERS OR IN A SPECIFIC FORM") AND TO COMMENTS TO ARTICLE 2.15 (NOW ARTICLE 2.1.15) ("NEGOTIATIONS IN BAD FAITH") OF THE UNIDROIT PRINCIPLES, AS WELL AS TO ARTICLE 3.301(2) AND (3) OF THE EUROPEAN PRINCIPLES).
Abstract
Two Lithuanian parties had entered into negotiations for the sale of a plot of land. After reaching a preliminary agreement subject to confirmation by a formal contract, one of the parties refused to stipulate the final contract, prompting the other party to bring a suit for damages.
In deciding in favour of Plaintiff the Court referred to Article 6.165 para.4 of the Lithuanian Civil Code dealing with damages for breach of preliminary contracts, and also to both the UNIDROIT Principles and the Principles of European Contract Law. While noting that neither of these two instruments contains special provisions on preliminary contracts, the Court referred to Comment 2 to Article 2.13 (now Article 2.1.13) ("Conclusion of contract dependent on agreement on specific matters or in a specific form") of the UNIDROIT Principles stating that "in commercial practice [...] it is quite frequent that after prolonged negotiations the parties sign an informal document called "Preliminary Agreement" [...] containing the terms of the agreement so far reached but at the same time state their intention to provide for the execution of a formal document at a later stage", as well as to the Comments on Article 2.15 (now Article 2.1.15)("Negotiations in bad faith") and concluded that "the party which breaks off negotiations without having good reason for this, and having at the same time created 'a founded trust and belief' that the contract will be concluded, is to be qualified as a party which breached the principle of good faith, and is therefore obliged to pay damages caused to the other party consisting not only of negotiation expenses, but also of the value of the lost opportunity". In the same context the Court also quoted Article 3.301(2) and (3) of the European Principles.
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