Liability for Breaking off Negotiation in Comparative Perspective

Purpose - This study examines whether negotiating parties can seek remedies for losses incurred during negotiations prior to the final conclusion of contract. Since the approach taken by English law and Korea law is different, it is necessary to analyze the scope and requirements for imposing liability for breaking off negotiations. This comparative study provides practical guidelines to avoid risks and to choose an appropriate governing law in pre-contractual process. Design/Methodology - This study executes a comparative analysis to find out the implication of imposing liability for broken negotiation. It evaluates the scope and requirements for imposing this duty under the two legal systems. By highlighting the strengths and weaknesses of each system and each court’ treatment of this liability, this study equips negotiating parties with a better understanding of how two legal systems intervene to deal with this matter. Findings - According to legislative history, it seems that liability for broken negotiation is unlikely to be governed by CISG thereby turning to domestic law. English law does not recognize the general principle of good faith, therefore in the case of a wrongful breaking off of negotiation, an aggrieved party may bring a claim based on the notion of misrepresentation or restitution. In contrast, Korean courts impose liability to negotiate in good faith on negotiating parties. In the case of a violation of this duty, compensation can be sought by an aggrieved party according to a violation of tort liability. However, this liability is imposed in a limited number of situations. Originality/value - Different legal systems have regulated liability for breaking off negotiation differently. Since legal systems have their own features, attitudes, legal effects and solutions for seeking damages, the liability for a wrongful breaking off of negotiation has been explored according to each legal system. However, comparative studies on this liability in pre-contractual process in English and Korean law have been rarely examined. As legal protection is limited during negotiation, it is necessary to consider methods to protect the interest of negotiating parties according to the two legal systems.