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[Yingdong International] Force Majeure under Italian Law
Time:2020-09-26 14:57 Click:

By Wu Jin, Francesco Clerici

 

With the outbreak of COVID-19, there have been over 2000 confirmed cases in Italy, and lockdown measures have been imposed on multiple cities that are most affected. Early February, I contributed to an essay on Force Majeure under Italian Law written by Shanghai Bar Association’s Committee on the Belt and Road Business Study. In view of the pandemic in Italy which may affect China’s trade and investments with Italy, the majority of which are under contracts governed by Italian law, I have compiled information on force majeure under Italian law for easy reference for all interested companies. Special thanks should be given to Francesco Clerici, lawyer from Milan office of Bureau Plattner, for his assistance with amending this article.

 

1. Definition of “Force Majeure” under Italian law

 

No specific definition of force majeure (Forza Maggiore) is found in the Italian legal system. Force majeure is generally considered as a force or event that is either natural (such as earthquakes, disease outbreaks and natural disasters) or legal (such as decisions made by public authorities and cancellation of public authorization). It is not dependent on any affected party’s action or decision, and is irresistible by all affected parties.

 

Force majeure is an unpredictable and extraordinary event that determines the anticipated termination of a contract (when the force majeure event renders either party’s performance of its obligations impossible or excessively burdensome), amendments to a contract (when performance becomes excessively burdensome or partially impossible), and/or any exemption from liability for breach of contract. The abstract of the decision (no. 12235/2007) of the Supreme Court of Cassation of Italy shows express provisions that a force majeure event shall have at least two characteristics, namely “extraordinariness” and “unpredictability”:

 

“The extraordinariness shall be of an objective nature, based on elements of reference values such as frequency, size and intensity, which can be measured and, for example, can at least be quantified and classified from a statistical perspective.”

 

“The unpredictability needs to be evaluated against objective standards, with reference to the typical capacity and diligence of an average person, giving consideration to the circumstances surrounding the contract conclusion and the lack of abstract possibility of events.”

 

2. Preconditions for and consequences of contract rescission and alteration due to “force majeure” under Italian law

 

(1) Definitive impossibility vs temporary impossibility

Total impossibility vs partial impossibility

 

Under the Italian Civil Code, liability for “impossibility of or delay in performance for any reason not attributable to the debtor” may be excused in part or in whole. However, the Italian Civil Code classifies impossibility of performance as definitive impossibility and temporary impossibility, as well as total impossibility and partial impossibility. As regards definitive or temporary impossibility, obligations may be terminated only in case of definitive impossibility; where the impossibility is temporary, obligations may be terminated only if the force majeure event lasts until such time as the debtor can no longer perform or the creditor no longer has a need for the performance. Thus, termination of a contract may be automatically triggered only by definitive impossibility caused by a force majeure event (the occurrence of which renders the performance impossible). If the impossibility is only temporary, it is necessary to analyse and confirm whether the force majeure event will last until the creditor no longer needs the performance (or the performance no longer applies to the debtor).

 

As regards total and partial impossibility, only total impossibility would cause contract termination. If partial impossibility occurs, the obligations that are still possible shall be performed, whereas for the impossible obligations the other party is 

entitled to request a reduction of the price or, if it has no interest in accepting partial performance, the termination of the contract (with the right to recover any payments made).