Italian contract law
The main sources of the law of contract are:
The legislative provisions comprised in the
Civil Code of 1942
Various statutory laws enacted to regulate
individual contracts or specific aspects
Customs and equitable principles in general
are residual sources.
Judicial decisions play a primary role in the
process of implementing legislative rules
Freedom of contract
The principle of freedom of contract is not
positively recognized as a general principle by
the Italian Constitution of 1948.
It is sometimes held that the freedom of
contract principle is embodied in article 2, as
well as in articles 41 and 42 of the
Constitution
Article 2
The Republic recognizes and guarantees
the inviolable human rights, be it as an
individual or in social groups expressing
their personality, and it ensures the
performance of the unalterable duty to
political, economic, and social solidarity.
Article 41
(1) Private economic enterprise is free.
(2) It may not be carried out against the
common good or in a way that may harm
public security, liberty, or human dignity.
(3) The law determines appropriate
planning and controls so that public and
private economic activities may be
directed and coordinated towards social
ends.
Article 42
(1) Property is public or private. Economic goods may
belong to the state, to public bodies, or to private
persons.
(2) Private ownership is recognized and guaranteed by
laws determining the manner of acquisition and
enjoyment and its limits, in order to ensure its social
function and to make it accessible to all.
(3) Private property, in cases determined by law and with
compensation, may be expropriated for reasons of
common interest.
(4) The law establishes the rules of legitimate and
testamentary succession and its limits and the state's
right to the heritage.
Judicial decisions
The Italian Courts are called to implement
general legislative rules and to apply equitable
principles on a case-by-case basis. One
example is the analysis of the duty to act and
perform the contract in accordance with good
faith and fair dealing set forth by arts. 1175
and 1375 CC
Civil Code
Title II of book IV on Obligations, arts 1321 to 1469
It is a general section on typical contracts, which
contains rules on requirements, interpretation, effects,
discharge, rescission, assignment and validity of a
contract
Title III of book IV on Obligations, arts 1470 to 1986
It is a section on individual contracts, comprising
specific rules and exceptions for the so called
nominate or typical contracts
Atypical contracts
Pursuant to article 1322, para. 2 CC, the parties can
also make contracts that are not of the types
specifically regulated in the Code provided that they
are directed to the realization of interests worthy of
protection according to the legal order. The Courts
must determine that such contracts are worthy. When
a certain form of agreement is widely accepted
within the international legal community, therefore,
Italian Courts always consider it enforceable
When is a promise legally binding?
Art. 1325 states that every contract must
have a causa. The causa of the contract
explains its purpose. It is the reason that
justifies the promise and the obligation.
This is characterized by the concepts of
cause suffisante, raisonnable et juste
Contratto di scambio
The most important case in which a promise is
considered binding under Italian Contract Law is the
typical economic exchange. This means that a
promise is enforceable whenever it is part of an
exchange of an economic nature, such that a counter
promise, or a reciprocal performance, can be
identified.
Therefore, when the parties face reciprocal legal
detriment, corresponding to reciprocal economic
interests, the causa requirement is fully satisfied and
there is no enforceability problem related to the
absence of causa
The consent of the parties
Almost every legal system recognizes the
general principle that a contract originates
from the agreement of two or more parties and
that it is substantially the expression of the
consent of those parties to the promises made.
Article 1321, in fact, states that a contract is
the agreement of two or more parties to
establish, regulate, or extinguish an economic
legal relationship among themselves
Binding force of the offer
The Civil Code regulates different situations in
which the offer is deemed to be irrevocable or the
revocation gives rise to liability.
Pursuant to article 1329 CC, if the offeror has bound
himself to keep the offer open for a certain time, the
revocation is without effect.
If no period of irrevocability is specified, according
to art. 1328 CC., the offer can be withdrawn at any
time before the contract is concluded.
Acceptance and conclusion of the contract
A contract is formed at the moment the person who
made the offer gains knowledge of the other party’s
acceptance. The acceptance may be revoked, but
revocation must come to the knowledge of the
offeror before acceptance.
According to article 1335 CC, an offer, acceptance, and their revocation,
and any other declaration directed to a given person, are deemed to be
known at the moment they reach the address of the person to whom they
are directed.
Preliminary negotiations
Preliminary negotiations may be defined as including
any communication prior to the time of acceptance.
The Italian Civil Code highlights the importance of
good faith in contractual relationships throughout
several articles.
Art. 1336 – contract must be interpreted following
good faith
Art. 1175 –Debtor and creditor must behave following
the rules of good faith and fair dealing
Art. 1337 – the parties must behave in good faith
during the pre-contractual bargaining and contract
drafting
Pre-contractual liability
an appropriate cause of action
Situations involving
Knowledge of contractual
unjustified breakdown
invalidity
of negotiations
Knowledge of contract invalidity
Article 1338 CC
[h]e, who knows or must know there is
ground for contract invalidity and did
not disclose it to the counterpart, has to
pay the damages suffered by the other
which relied, without fault, on the
validity of the contract
Unjustified breakdown of negotiations
Whenever the parties reach a stage
during the bargaining process when
one of them is induced to rely on the
conclusion of the contract, the party
who decides to abandon the
negotiations
without
a
valid
justification is liable for damages
Capacity of the parties
Any person who has not been formally
declared incapable of entering into legal
transactions by the law may enter into a
contract.
Italian law treats persons who are wholly
lacking capacity and persons partially lacking
capacity to enter into legal transactions
differently
A transaction or a contract is
voidable when it has been entered
into by a person legally determined
to
lack
capacity.
Persons
momentarily under incapacity may
render a transaction void only if they
prove the existence of incapacity at
the time of the transaction
Absence of consent
The contract might be annulled if
consent was given only by error,
or was extorted by duress or
obtained by deceit
Mistake
A contracting party whose consent
was given by mistake can demand
annulment of the contract when the
mistake is essential and recognizable
by another contracting party at the
time of the contract’s making
Fraud (deceit)
Fraud is a cause for annulment of the contract
when the deception carried on by one of the
contracting parties was such that without it,
the other contracting party would not have
entered into the contract. If the deception was
committed by a third party the contract is
voidable if the deception was known to the
party who benefited from it
A deception that arises from innocent
misrepresentation is not fraud, nor is the
exaggerated praise of one’s own ware
(dolus bonus)
Silence by itself does not amount to
fraud, unless an express duty to speak has
been violated
Duress
Duress is ground for annulment even if it has
been committed by a third party. There is no
definition of duress in the Code, but it is fair
to say that it consists of physical or moral
restraint upon the will of a person, which
induces him or her to give consent
Other conditions of validity
The causa of the contract is illicit when it proves
contrary to mandatory rules, public policy, ordine
pubblico or good morals.
A contractual obligation is valid only if it has a legal
causa.
Article 1343 CC, by calling on the broad concept of
mandatory rules, public policy, and good morals,
offers the judge a powerful tool to test the
compatibility of the contractual situation with the
fundamental values of the legal order
The consequences of absence of consent
or lack of substantive quality
Defect of consent
A contract vitiated by mistake, fraud or
duress can be annulled. However, the
party who suffered the fraud, the mistake
or the duress bears the burden to enforce
the right to annulment against the other
party.
Lack of the essential elements of the
contract
A contract lacking one of its essential elements
(consent, licit cause, object) is void under Italian law.
The parties, as well as other interested persons can
always oppose the party who wants to enforce the
contract by affirming its nullity. Moreover, if the
contract is void the action to obtain a declaration of
nullity can be brought by anyone provided that they
have an interest in the matter, and the court may
declare a contract void ex officio, while resolving a
controversy or dispute arising from it.
Annullabilità
In cases of annullabilità (that is to say, merely
voidable and not void) the only party entitled
to seek annulment is the one whose protection
has formed the basis of legal invalidity.
While the person who could have claimed the
annulment may validate a voidable contract
pursuant to article 1444 CC, a void contract
can never be validated by anyone.
Characteristics of performance
The purpose of the contract is the
performance of the parties, and full
performance is its natural conclusion: it
is what the parties have in mind when
they enter into the agreement. In this
sense, performance means the exact
fulfillment of the promises made. It is
referred with the expression esatto
adempimento (exact performance)
The conduct of the parties
Article 1176 sets forth two different levels of care
and diligence. The first is the so-called bonus
paterfamilias standard of care. This is the general
standard of care, which is based upon an idealized
reasonable man. The second standard is higher and it
refers to the obligation undertaken by persons acting
in their professional capacity (lawyers, accountants,
doctors, consultants,etc). This standard requires a
higher level of care proportionate to the special
knowledge of professionals and to the nature of the
activity as well as its social implications.
As a general rule, in contracts providing for
mutual counter-performance, when one of the
parties fail to perform his obligations properly,
he is considered in breach, and the other party
can choose to demand either exact
performance or termination. The non breaching
party is also entitled to recover compensation
for the damages suffered as a consequence of
the breach