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Home|Italian Law Quickguides: Termination of Contracts

Italian Law Quickguides: Termination of Contracts

The termination is related to an event that is subsequent to the formation of the contract and impedes the fulfillment of the obligations therein contained. According to article 1372 of the Italian Civil Code, a contract can be terminated by mutual consent or in other cases provided for by the law.

 

Mutual consent

It is one of the first events provided for by the Italian Civil Code and is closely related to the freedom parties have to enter into a contractual relationship. Therefore, mutual consent may be seen as a separate contract that parties can stipulate to terminate an existing contract as provided for by article 1321 that states that the contract is the agreement with which two or more parties can establish, govern or terminate a legal relationship.

For the mutual consent to produce legal effects, it must be given by all the parties that participated in the original contract they wish to terminate.

Under Italian contract law, the new terminative contract must be in the same form contain all the necessary elements of the original contract. This is particularly important when it comes to its form. If the original contract was a written contract, the new one terminating it must take a written form as well. If the parties agree to terminate a written contract with a verbal agreement, the latter will have no effect in terminating the original contract.

Depending on the type of contract, parties can also decide that temporal effects the mutual consent might produce on the original contract: they can decide that it might produce its effects from that moment; or it might act retroactively, as if the original contract did not take place.

 

Withdrawal

The right to withdrawal is the action taken by the contracting party to terminate the contract. This unilateral action can be rightfully exercised only if it is so provided in the contract. The right to withdrawal is usually provided to the weaker party (such as a consumer) and is often a contractual clause provided by law (e.g. consumer law offers to a consumer the right to withdraw from distance marketing of financial services).

Under Italian law, the withdrawal must be in the same form of the original contract.

 

Termination due to non-performance

Under Italian law, in case of non-performance the non-defaulting party can either ask the defaulting party to fulfill its obligation or to terminate the contract (article 1453), without prejudice to a claim for compensation. This applies only to those contracts where both parties are obliged to perform a specific obligation. This specification made by the Italian Civil Code is rather important because it determines the non-applicability of this article to contracts entailing a gratuity.

The termination is offered to the non-defaulting party as a remedy and can be ordered by a judge or, if there is a contractual clause providing for the termination of the contract in case of non-performance.

For the non-performance to be a valid ground for termination, Italian law demands for it to be attributed to the counterparty (if, for example, non-performance is due to a global pandemic that has impeded the counterparty to perform its obligation). Not every non-performance of a contractual obligation can lead to a termination. According to article 1455 of the Italian Civil Code, it must not be of minor importance having regard to the non-defaulting party’s interest.

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2020-10-24T15:59:34+00:00
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