Contractual Negotiation in General

Contractual negotiations include all acts undertaken by the parties before the actual contract is concluded. Contractual negotiations are generally not binding. No law regulates how contractual negotiations are to be carried out. Although contractual negotiations are non-binding they are nevertheless of legal significance. If the content of the contract is ambiguous, the negotiations may be turned to for help in interpretation.

Contractual negotiations do not always lead to the conclusion of a contract. Consequently, no legal obligations usually arise. If the contractual negotiations are frustrated for reasons clearly related to one party and that party never had an intention to conclude a contract or provided false or misleading information to the other party, such party may be ordered to pay the other party’s expenses incurred from the negotiations. Lost profits are, however, not compensated, as they are a part of the company’s business risk. It is, however, under very exceptional circumstances that one party can be ordered to pay the costs for frustrated negotiations. This is when one party has entered into the negotiations with the intention of damaging the other party or has clearly acted unreasonably. See the Finnish Supreme Court precedent KKO 2009:45 in [The Basis of Liability in Contractual Negotiations].