Precontractual negotiations

?Precontractual Negotiations? essentially represents a tough and complicated process, which has not been regulated in positive law and further a certain relationship among the parties, appearing in the framework of this process. Turkish Code of Obligations regulates the conclusion of the contract as a process, demoted to a certain time point and the procedure preceeding to the conclusion of the contract has not been administered in the Code. However, it has to be stated clearly, that the lack of regulation may not degrade the legal value of such a process, which the parties may carry out during a long time period, during which the parties would mutually acquire informations related with each other?s professional confidentiality and further with each other?s trade secrets. Evidently, it would not be appropriate to claim that law would hold aloof from this legal relationship.In accordance with Roman Law, formalistic legal approach is based on the concept, that the parties shall express their wills in certain forms, whereas an expression excluding such forms may not be legally appreciated. As a consequence of this, the negotiation process has no value in the context of this approach. On the other hand, liberalistic view, putting forward the value of the will attaches importance to the negotiation process. Several codes enforced on the base of this liberalistic view have underlined the principle of freedom of contract, which led to the point, that the contracts were liberated from formal validity rules. According to this principle concurrently governing Turkish Law of Obligations, since the parties are liberated in every phase regarding the conclusion of the contract, the negotiation process has become a regime adequate to create legal consequences.Moreover, economic development equivalently constitutes the practical base, bringing the negotiation process in the foreground. The enhancement and internationalization of the economic units and further evolutions in telecommunication create innumerable options for the conclusion of a contract. Evolutions in financing, transport and telecommunication enable the access to worldwide markets within some seconds. In view of these innumerable options, a party, tending to conclude a contract, has to communicate several persons and further to find out the most feasible option. Such communications with many eventual counterparties has the consequence, that solely a party will be nominated as the counterparty, whereas the other eventual contractors will not bring the negotiations to the conclusion phase. Regarding this point, the provisions governing the negotiation process and the fact how the negotiations have been finalized without the conclusion of the contract, will be deemed as important subjects affecting the legal situation of these non-parties to the contract.Although the negotiation process has not become subject to any regulations, legal conflicts arising from this process shall be equivalently governed and resolved by the regulations of the Code of Obligations. Subsequently, prevailing legal rules shall be deemed as a basis in resolving such conflicts.Our dissertation, consisting of two main chapters, focuses on the legal problems such as the legal nature of the documents referring to the negotiation process and formulated by the negotiation parties, the validity of certain institutions originating from Anglo- American Law, the determination of the obligations of conduct of the parties during the negotiation process, the consequences of invading such obligations and finally the legal nature of the liability regime arising from the negotiation process, whereas the appropriate manner to resolve such legal problems according to prevailing positive law.The first chapter handles the negotiation process as a whole and focuses on the nature and preferences of the relationship among the negotiation parties. First, the principle of freedom of contract has been examined in this chapter, followed by the evaluation of the negotiation process in the view of historical approach. This approach will be integrated to the examination of the methodology to be applied as of the conclusion of the contract.Subsequently, several versions of the negotiation documents are appraised in view of different aspects, whereas certain types of these documents, such as letter of intent, instructions to proceed, contract of negotiation, draft of contract, punctuation, meeting minutes and gentlemen?s agreement have been examined by regarding their preferences and elements by taking into account certain forms of legal nature asserted to legally evaluate and classify such documents.The second chapter of the dissertation treats the obligations of the parties during the negotiation process, whereas obligations arising from a negotiation document and obligations arising from bona fides rule, in the event of the absence of a negotiation document, have been analyzed individually in detail. Culpa in contrahendo liability, appearing as the fundamental sanction covering the breach of such obligations shall be handled in this chapter. In this framework, the elements of this liability regime have been determined, the concept of fault has been defined and the rules of positive law applicable to this institution lacking of a positive law base have been inquired by considering the preferences of failed negotiation courses. Regarding the discussions in the literature related with these considerations, specific aspects such as burden of proof, prescription and liability arising from the acts of the accessory personnel shall be assessed thoroughly.Assessing the liability arising from the negotiation relation, the rupture of negotiations which causes to the failure of contracting which is an apparent legal situation has been taken into account as a base. Several versions of culpa in contrahendo liability, formulated in the Turkish Code of Obligations (i.e. art. 26, 36/2, 39 CO) have not been equivalently treated independently, but mentioned as the specific context may require, since each version is adequate to be handled as an independent dissertation subject.As a consequence of these considerations, two main principles have been identified to govern the negotiation process: Freedom of contract and bona fides.Freedom of contract enables the parties to commence the negotiations in any manner according to their consents and to formulate the content of the contract equivalently in the manner the parties? desire. The parties may conclude the agreement instantly or may expand this process to a long period. The negotiation process shall be deemed as a course, where the parties discover own and each other?s limits, which may generate sophisticated conflicts. Particularly, the conclusion of joint venture agreements and merger contracts may take years. As a result, the parties tend to formulate certain negotiation documents to facilitate the process. In the event that such documents will be drafted by non-lawyers, the parties may face complicated problems.The sole limitation in formal and material views affecting the precontractual documents, bearing many titles, is the imagination of the parties. As a consequence, it is not appropriate to classify such documents in a strict manner and to determine its content in a definite way, since the legal nature of such documents may not be assessed without analyzing the content of such documents. Despite that, it is possible to deduct common aspects such as the number of parties, creation of obligations, the binding nature of the document and the period of validity. Determining such aspects, specific attention shall be attracted to the legal terminology, applied in these documents. Although Article 18 of CO definitely prescribes that the authentic will of the parties shall be regarded in state of their expressions, the parties shall act very carefully in or even abstain from utilizing the terms such as ? offer?, ?acceptance?, ?commitment? and ?obligation?. Another important aspect is the punctuation, where the parties tend to formulate the phase, which they have arrived during the negotiation. Actually, such a document, serving to determine the points already concluded among the parties bears the risk of the conclusion of the agreement in an unexpected manner for the parties. Evidently, article 2/1 enforces the presumption, that the contract has been concluded and completed, in the event that the parties have agreed on objective essential elements of the contract. Regarding this risk, the parties shall use the terms ? ?subject to contract? or ?not binding ? in order to prevent the conclusion of the contract.Freedom of contract, governing the negotiation process decisively appears as ?freedom not to contract? in this process. According to this principle, any of the parties may initiate the negotiation at any time, whereas such party may end the negotiation without concluding the contract. Any party, participating in the negotiations in order to conclude an agreement, shall take into consideration that the contract may not be concluded. The sole limit compassing the parties to stop the negotiations is the obligation to act in accordance with the principle of bona fides.In other words, in the event that the parties will be charged with a liability of compensation in case of the rupture of the negotiations, the ground of this compensation is not the failure of conclusion but the faults of the parties during this process and their infringement of the obligations of conduct. Fault in this framework means that the party in fault has invaded the obligations of conduct on purpose or on negligence.In the event that the parties have not regulated such issue mutually, the composition of the obligations of conduct shall be determined and evaluated in the light of bona fides principle. Such infringement may not be classified as a tort, whereas it is the invasion of a relative relationship among the parties of negotiation, binding solely such parties and subject to be invaded solely by these parties. As a result, culpa in contrahendo liability clearly differentiates itself from the liability of tort. The expectations and mutual interests of the parties related to the culpa in contrahendo liability are similar to the elements of contractual liability. However, such comparison may not serve to the classification of culpa in contrahendo liability as a contractual liability as of the absence of a concluded contract. Essentially, the dual characteristics of the relationship among the parties bears the preferences of these two different liability regimes and consequently constitutes an independent type of liability.For this reason, the rules applicable to the precontractual negotiations are deprived of a ground of positive law. Evidently, Swiss Cassation Court, prescribing that the liability of culpa in contrahendo constitutes an independent and sui generis source of liability and that such liability regime challenges its own logic of opportunity, has perceived the eclectic approach of Jäggi. Our dissertation is that there is a lacuna of law but such lacuna shall be covered by applying the contractual liability rules to culpa in contrahendo liability in an analogical manner.