The negotiation for conclusion of contract can be broken off at any time before the completion of the contract on the basis of the Principle of freedom of contract and Self-responsibility. That is to say a party is free to negotiate and is not liable ...
The negotiation for conclusion of contract can be broken off at any time before the completion of the contract on the basis of the Principle of freedom of contract and Self-responsibility. That is to say a party is free to negotiate and is not liable for failure to reach an agreement. Consequently a party who have firmly believed and have paid the costs connected with the preparation of an offer is to take the risk on his own responsibility. However, it is coincided with a view that a negotiating party who has broken off negotiations in bad faith(contrary to good faith) is exceptionally liable for the losses caused to the other party who has reasonably relied upon an offer even before it has been accepted. The problem is how can we frame a theory that will be able to support theoretically the liability for the losses caused to the other party by breaking off negotiations in bad faith. On this problem, the majority in Korea insists that the liability for the losses caused to the other party by breaking off negotiations in bad faith is a kind of breach of contract from the pre-contractual duties, and insists that we should acknowledge the liability of one party for the other party`s reliance damages(a breach of contract) suffered through relying on the party) by analogical interpretation of the Article 535 of the Koean Civil Code(KBGB §535) that includes provision for the Culpa in Contrahendo in an invalid contract owing to impossibility from the beginning. Recently a new critical theory has emerged and pointed out that the Theory of Culpa in Contrahendo is merely an artificial theory for the purpose of resolving problems from the defectiveness of the German Tort Law(BGB), and the theory insists that the Korean Civil Code includes general provision for tort(KBGB §750) and so in Korea not only a person may be held liable for harm resulting from infringement of property(not of absolute rights) but also the immunity from responsibility in employer`s liability is scarcely permitted, therefore it is not necessary for us to introduce the German theory of Culpa in Contrahendo. The Korean Supreme Court`s precedent takes a firm standpoint that cases of this kind(the liability for the losses it has caused to the other party by breaking off negotiations in bad faith) are to be argued as tort cases rather than as contract cases, and to impose tort liability from breaking off negotiations in bad faith for a party it is essential for the other party to have reason to rely upon on the positive outcome of the negotiations. I think that the critical theory and the standpoint of The Korean Supreme Court`s precedent that apporoved the new critical theory are all right and proper.