The Negotiation Procedure

When the negotiations are expected to be very time-consuming and expensive, it is sensible to agree on the rules of the negotiation process. Agreeing the negotiation practice does not mean an agreement about the content of the contract to be negotiated but merely how the negotiations are to be carried out. The agreement will set out the rights and obligations of the parties and their positions in respect of third parties during the negotiations. It may for instance be agreed when the preconditions for the main contract have been fulfilled or whether the parties are free to negotiate with others at the same time.

A Finnish Supreme Court precede KKO 1999:48 provides an example where the parties had made a binding agreement in respect of the negotiation practices to be observed during the negotiation procedure. In its invitation for tenders, a housing association had agreed to comply with the building trade principles on competitive bidding (RT 16-10182). After the opening of tenders it had, in breach of these principles, commenced negotiating the contract price with bidders, and then accepted a new cheaper bid made by another construction firm than the firm, which had originally made the cheapest bid. The building developer was ordered to pay compensation to the construction firm, which originally made the cheapest bid, in respect of damages incurred as a result of losing the bid. The basis for calculating the compensation was a so-called positive interest. A positive contractual advantage means that the injured party must be put in the position they would have been in if the contract had been properly performed. Therefore, not only direct damages, but also, for example, lost profits, should be compensated.