Basing itself on a German judgement, the Maltese Court of Appeal recently delivered a landmark judgement on pre-contractual liability which is sure to shape local commerce. The case filed in the names Av. Peter Fenech noe vs. Department of Contracts concerned a claim for damages made by a consortium after its offer in response to a tender issued by the Department of Contracts for the provision and installation of a Traffic Management Information System was unjustly turned down. Despite the fact that the First Hall, Civil Court had established that the consortium had been unreasonably disqualified on 27th June 2008, the consortium could not materially be reconsidered in the selection process as the tender had been given to another entity in the interim.
Although the judgment handed by the Court of First Instance had cited previous decisions delivered by the Maltese courts dealing with pre-contractual liability, namely Giuffrida vs. Borg Olivier, Pullen pro et noe vs. Matysik et, Cassar vs. Campbell Preston, Grixti vs. Grech, Busuttil vs. Muscat noe, Portelli noe vs. Falzon et and Seguna et vs. Kunsill Lokali Żebbug as a basis for its decision, the facts of the case in question did were deemed not give rise to pre-contractual liability.
Findings by the Court of Appeal with regards to Pre-contractual Liability
However, when the case was taken to the Court of Appeal, the Court cited a 1911 German court decision referred to as Linoleumfall which established that when a legal relationship is born between parties in preparation for a purchase, it is very similar in properties to a contract producing legal obligations, thereby recognising the contractual basis of pre-contractual liability. Thus, it was decided that the Director of Contracts should in fact be held responsible for damages on the basis of the legal notion of pre-contractual liability. The court further stated that once a consensual legal relationship was created between the parties, the Department of Contracts could not ignore the consortium’s offer unless there was a valid legal reason. Thus, if one does not fulfil the conditions of his tacit obligation, it is equivalent to a party not observing contractual obligation. This was decided on the on 29th April 2016.
The Court ordered the Department of Contracts to provide compensation based on the damages which the company had incurred as losses in the submission of the tender bid, rather than loss of profits or lucrum cessans. This judgment is expected to be the cornerstone for further recognition by Maltese courts of the contractual basis of the notion of pre-contractual liability.
