Liability Arising from Contract Negotiations: Culpa in Contrahendo
Contracts can have legal consequences not only after they are signed but also during the negotiation phase. At this point, although not explicitly regulated in our legislation, the concept of culpa in contrahendo, which is crucial at the beginning of the contractual relationship, comes into play. This term, which can be translated into Turkish as “pre-contractual fault,” arises when one party suffers damage due to the other party’s wrongful conduct at the start of the contractual process. In other words, it addresses the liabilities that may arise during the pre-contractual period when the parties act based on mutual trust.
In this article, we will explain what culpa in contrahendo is, how it differs from concepts like preliminary contracts and fraud, and under which circumstances it becomes relevant.
"In culpa in contrahendo, the basis of liability is the relationship of trust. Liability arises from the breach of this trust."
Concepts Similar to Culpa in Contrahendo
1) Preliminary Contract: A preliminary contract, like any other contract, is established by the mutual declaration of intent of the parties and contains specific obligations. However, culpa in contrahendo is different from this. While culpa in contrahendo covers pre-contractual relationships, it is not a preliminary contract.
We can summarize the fundamental differences between these two concepts as follows:
A preliminary contract creates an obligation to conclude a contract in the future, binding the parties to this commitment.
Culpa in contrahendo relies on the trust relationship between the parties, and liability arises from the violation of this trust.
Although both belong to the pre-contractual phase, a preliminary contract represents a legal relationship that has gone beyond mere negotiations, while culpa in contrahendo refers to the liability arising at the earlier stage before any contract is concluded.
2) Fraud: In our legal system, the principle of freedom of contract prevails; parties are free to conclude contracts as long as their consent is not vitiated. However, when consent is defective, this situation changes. Defective consent occurs when a person is unable to enter into a contract with full and correct intent, which may lead to the annulment of the contract.
Fraud is one form of defective consent. Fraud occurs when one party deliberately misleads the other into concluding a contract, either by providing false information or by maintaining an existing misunderstanding. The legal consequences of fraud are as follows:
The deceived party can withdraw from the contract within one year from discovering the fraud.
Upon withdrawal, the contract is deemed void from the beginning, and the parties must return to their original positions.
What are the differences between fraud and culpa in contrahendo?
In fraud, it is not necessary for damage to occur; the mere vitiation of consent is sufficient.
In contrast, for culpa in contrahendo liability to arise, actual damage must have occurred.
If damage results from fraud, the claim for compensation may be considered under culpa in contrahendo.
Elements of Culpa in Contrahendo
For culpa in contrahendo liability to arise, three essential elements must be present: damage, fault, and causality. When these elements are combined, culpa in contrahendo liability arises, and the injured party gains the right to claim compensation for negative interest (reliance damages).
1) Damage: To claim compensation, there must first be a tangible or intangible loss—damage resulting from the disappointment of the expectation that the contract would be concluded. Damage refers to a reduction in one’s assets or personal rights against one’s will. Examples of material damage include expenses made in reliance on the contract being concluded (such as notary fees, travel expenses). An example of moral damage would be if a businessperson publicly announces a forthcoming contract and suffers reputational harm when the contract does not materialize.
2) Fault: The second element of culpa in contrahendo liability is fault. Fault refers to a person’s intentional or negligent violation of legal norms. It is not necessary for the harm to be caused intentionally for culpa in contrahendo liability to arise. Even slight or gross negligence can result in liability. However, if the injured party is also at fault, the compensation amount may be reduced.
3) Causality (Causal Link): There must be a causal link between the damage and the wrongful conduct. In other words, if the harmful event had not occurred, the damage would not have arisen. For example, if a company leads the other party to incur expenses by promising to conclude a contract and later withdraws, the incurred expenses may be claimed for compensation based on this causal link.
If contract negotiations are unilaterally and unjustifiably terminated, creating a justified expectation in the other party, the resulting damage is compensable under culpa in contrahendo liability.
What Types of Damages Can Be Compensated Under Culpa in Contrahendo?
Under culpa in contrahendo (liability arising from contract negotiations), negative damages suffered due to the frustration of legitimate expectations can be claimed. These damages arise from expenditures made or opportunities missed based on the assumption that the contract would be concluded.
Examples of compensable damage items include:
Expenses incurred during the contractual process: Notary fees, duties, postage costs, and similar direct expenditures
Costs incurred for performing the anticipated contract: Any expense made in reliance on the conclusion of the contract
Lost opportunities: Losses from rejecting other offers due to the expectation of the contract
Losses due to the non-performance of another contract: For instance, missing out on a more advantageous agreement because the anticipated contract could not be executed
These items fall within the scope of compensable damages under culpa in contrahendo liability.
What is the Statute of Limitations for Culpa in Contrahendo Liability?
The statute of limitations for claims arising from damages due to pre-contractual negotiations is determined by the general provisions of the Turkish Code of Obligations. According to court decisions and legal doctrine, unless otherwise stipulated, claims based on culpa in contrahendo are subject to a general 10-year limitation period.
In such cases, the burden of proof lies with the injured party, who must demonstrate the occurrence of the damage and the fault of the other party. Therefore, it is crucial to manage the legal process carefully and to present all evidence accurately before initiating legal proceedings.
