THE LIABILITY OF PARTIES IN PRE-CONTRACTUAL PHASE IN INTERNATIONAL BUSINESS CONTRACTS (S000407)

A contract is needed in the context of international business activities. A pre-contractual phase is an important phase in making a contract. However, some legal issues may be raised before a contract is considered to have a legally binding power among its parties which is in a negotiating process. Therefore, the problems discussed in this paper are how strong the legal binding of pre-contractual and how legal consequences of parties do if there is a cancellation from one party in pre-contractual phase.

The study aimed to examine the legal binding of pre-contractual in international contracts and the liability of the parties if there is a cancellation from one party in the pre-contractual phase.

The research method used in this study is normative legal research. This nonnative legal research or legal library research is performed by analyzing library materials or secondary data.

The research finding shows that the binding force of a contract has started since the process of pre-contractual negotiations and the creation of the MoU. The parties are bond to the pre-contractual stage is based on the principle of good faith and fair dealing by the parties as mentioned in article 1.7 UNIDROIT Principles of International Commercial Contracts. Therefore, if during the pre-contractual phase occurs cancellation caused by the interference contract by a third party, the party who did the interference must be liable for the losses caused by the cancellation.

It is recommended that the parties conducting the contract must be more careful in understanding the traditions and legal provisions that apply in the civil law and common law system. The legal liability has arisen since the pre-contractual stage. Therefore, the parties must truly understand the existing provisions on pre• contractual stage. In the pre-contractual phase the parties must truly understand the contents of the contract. If the agreement has been accepted by the parties the agreement has the force of law and cannot be canceled again without any valid reason. In the event of cancellation without a valid reason, the canceling party shall indemnify and benefits to be obtained.