Every time you order goods from a factory or sell your products to a wholesaler, shop or end consumer, you are entering into a contract. You don't need to have anything in writing in order to create a legally binding contract but it is helpful to do so as it means that everyone is on the same page as far as the commercial deal is concerned.
Pre-contractual liability
Many EU Member States, such as Italy and France, have specific laws that apply even before you enter into a formal contract. These laws are known as pre-contractual liability.
Broadly speaking, pre-contractual liability means that parties must act in good faith throughout contract negotiations and the contract formation process. This includes cooperation and disclosure of relevant documents during the negotiations.
You may find yourself breaching good faith obligations even if you do not intentionally act in bad faith. This can be a particular issue if you have asked the other party to incur substantial costs or lose out on other potential contracts and then pull out of the negotiations without a good reason.
The worst case scenario is that you find yourself liable for the missed opportunity of executing a similar contract with a different party with more profitable conditions. However, it is not possible to claim for damages based on the benefits that would have been available if the contract had been properly executed.
To find out more contact Rosie Burbidge, Intellectual Property Partner at Gunnercooke LLP in London - rosie.burbidge@gunnercooke.com
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