Italian law works and services contract

Companies looking to manufacture their products in Italy, one of the largest manufacturing countries in the World, might be asked to enter an Italian law contract known as Contratto d’Appalto (contract for works and services) to regulate their contractual relationship.

This article provides a general overview of the main aspects of the contract for works and services governed by Italian law.

Key points of the Italian law works and services contract

➤ The contract can have as its subject matter either a work or a service.

➤ The contractor / service provider must be a business entity whereas the client can be an individual or a business

➤ The contractor / service provider must have the means and methods necessary to achieve the result pursued by the client

➤ The contractor / service provider must perform the obligation exactly as agreed, and achieve the result pursued by the client

➤ The client is obliged to pay the contractor / service provider the price for the performance of the work or service

➤ There is no requirement as to the form of the contract

Legal framework and general considerations

The contract for works and services (in Italian: Appalto d’Opera and Appalto di Servizi, or simply Appalto) is regulated by the Italian Civil Code which provides a well detailed legal framework for this contract which is frequently used both in the private and the public sector. The flexible regulation allows its use across a wide range of industry sectors such as, but not limited to, construction and manufacturing.

For example, the same provisions of the Italian Civil Code dedicated to the contract for works and services will regulate the relationship between client and contractor for minor works (e.g., remodelling) or larger construction projects. The same is true if the contract pertains to the provision of a services.

The provisions of the Italian Civil Code regulating this contract are also used as a blueprint for a wide array of contracts that do not have a dedicated legal framework under Italian law, such as software development, outsourcing or engineering, just to name a few.

The Civil Code defines the contract for works and services as

the contract by which one party, with organization of the necessary means and with management at its own risk, undertakes the performance of a work or service against monetary remuneration (Article 1655 Civil Code).

As inferred from this definition, the focus is not on the type of work or service, but rather on the contractor / service provider. The reference made to the “organization of the necessary means” and “risk” indicate that the contractor must be a business which has the necessary means to carry out the works or services (small, medium-sized, or big company).

Therefore, this legal framework will not be applicable if the business owner performs the works or services by herself/himself (e.g., a sole trader or a family run business where works or services are performed by the business owner and her/his family members).

There is no such requirement for the client that can either be an individual or a business.

Obligations of the contractor

The contractor’s primary obligation under the contract is to ensure the client receives exactly the result pursued with the agreement. The contract must therefore be performed exercising diligence and adhering to the standards applicable to the contractor’s or service providers’ profession.

The diligence and standards of the contractor’s profession have been extensively used by Italian courts to broaden the contractor’s obligations.

In construction contracts, for example, if the design is provided by the client, the courts have held that the contractor is obliged to verify the compliance of the design provided by the client with the applicable technical standards.

Other obligations are:

➤ custody of the construction site or materials during the execution of the work or service

➤ inspection of the quality of the material even if they are supplied by the client

The law also provides a general prohibition to subcontract the performance of the works or services unless expressly authorised to do so by the client.

Obligations of the Client

The primary obligation of the client is to pay the contractor or service provider the price for the work or service performed.

In addition to this obligation Italian case law requires the client to cooperate with the contractor or service provider for the full duration of the contract. This entails an obligation for the client to ensure that the other party is put in the condition (legal and material) to perform the contract.

In construction projects, for example, the client must allow the contractor to enter the construction site to carry out the works. This can be applied to services contract if the service must be performed at the client’s premises.

A breach of the client’s obligation to cooperate may be considered by the courts as a valid reason for termination if the contractor is unable to perform its obligation.

Form and duration of Italian law works and services contract

The Italian Civil Code doesn’t impose any formal requirement for the contract to be legally binding. Parties are therefore allowed to a conclude a contract for works and services either verbally or in written form.

In verbal contracts, proof of the existence of a contractual relationship between the parties can be provided through witness evidence.

As for the duration, even if the performance of the work is prolonged in time, performance cannot be considered as continuous or periodic. This means that, once the contract is terminated, any performance must be returned to the other party (e.g., payment – Article 1458 of the Italian Civil Code).

This rule does not apply to services contracts that can have a continuous or periodic duration. If the contract is terminated, there is no requirement to return the performed obligation.