chapter 15

1. the “force of law” in respect of contracts

from the moment a contract is concluded, the parties are legally bound and cannot unilaterally exit without consequences

2. the right of withdrawal

recognized withdrawals

  • contract for work and services: the law provides a right of withdrawal for contracts related to the provision of work and services

  • contract for professional services: a professional services contract, like a lawyer or consultant, includes a provisional that allows for withdrawal

  • contract of mandate: mandate contracts, which involve one party acting on behalf of another, include several articles detailing when and how a party may withdraw from the mandate

the law provides protection for consumers entering into distance contracts, such as those conducted via the internet, telephone or tv shopping channels

consumers are provided with a "cooling-off" period, a set timeframe within which they can cancel the contract and return the purchased item, provided it is undamaged

sometimes, the right to withdraw is contingent upon the payment of a sum of money as compensation, and sometimes there’s a down payment that acts as compensation

3. contracts transferring ownership or limited rights in property

types of rights transferred

  • right of ownership

  • limited rights in property

  • other transfers: can include rights over other “things” specified in the contract

the transfer of ownership or rights is effective at the moment the contract is concluded

→ unlike in some other legal systems, the italian one does not need actual delivery of the property sold for transfer of ownership to be effective

the italian principle of mutual consent derives from the french civil code of 1804 which similarly codified the idea that ownership transfers occur upon the conclusion of an agreement

4. interpretation of contract

the interpretation of a contract is the process of determining the meaning and intent behind one

common intent is what the parties wanted that was explicitly written, their inner will

objective interpretation focuses on the outward expression and how they should be reasonably understood and subjective interpretation considers the internal, actual intentions of the parties

contracts must be interpreted according to the principle of good faith

interpretation shouldn’t be limited to the literal meaning of the words, but instead the context they are used in

guidelines for ambiguous contracts

  • effectiveness rule: a contract or clause should be interpreted in a way that gives it effect, rather than rendering it void or meaningless

  • local and business practices: ambiguities are resolved based on the general practices of where the contract was made

  • suitability to contract nature: ambiguous expressions are interpreted in a manner most fitting to the nature and subject matter of the contract

  • standard terms and formularies: when standard terms or pre-drafted forms are used, any interpreted against the party that prepared them

  • least burdensome interpretation: if ambiguities remain after applying all criteria, a gratuitous contract should be interpreted in the way that is least burdensome for the debtor

5. filling gaps in incomplete contracts

freedom to contract allows parties to determine the terms of their agreement and how their respective interests will be regulated, without requiring every detail of the contractual relationship to be specified

contracts can range from highly detailed documents (involving experts and formal drafting) to more basic agreements covering only essential terms

integration aligns the contract’s framework with the parties' intent and ensures it is practical and enforceable

method of integrating contracts

  • automatic insertion of mandatory terms: terms imposed by law are automatically included in the contract even if the parties’ terms contradict them

  • inclusion of customary terms: terms that are customary in the relevant context are assumed to be part of the contract unless explicitly excluded by the parties

  • binding nature of implied terms: a contract binds parties not only to its express terms but also to all consequences arising from it by law, custom, or equity

hierarchy of sources for integration

  1. law

  2. custom

  3. equity

nominate contracts are specific contract types with predefined rules in the civil code

6. contract and third parties

a contract will typically only affect the parties who have entered into it

→ parties to a contract cannot create rights or impose duties on third parties through their agreement

while a contract may not directly bind third parties, the actions taken to perform contractual obligations can indirectly affect them

a contract that explicitly provides a benefit to a third party can be valid, provided that the third party has an interest in the contract

7. contingent conditions

contingent conditions are uncertain and future events upon which the validity or termination of a contractual obligation depends

types of contingent conditions

  • condition precedent: the contract takes effect only if a specified event occurs

  • condition subsequent: the contract remains effective until a specified event occurs

a contract with unlawful conditions is void

a condition is merely potestative if the event described depends solely on the arbitrary will of one of the parties, and therefore is void

parties must act in good faith to protect the interests of the other party while the contingent condition is pending

a condition is considered to have been met if it fails to occur because one party intentionally prevents it, thus protecting the contractual interests of the other party

8. agency and representation

many contracts are not negotiated or concluded by the parties directly involved, but rather by their representatives, where an agent represents the principal

power of attorney is the legal instrument by which an agent is granted the authority to act on behalf of the principal

three conditions must be satisfied for a contract by an agent to have legal effect

  1. agent must act in the name of the principal: the agent must explicitly state that they are acting on the behalf of someone, or else they will be legally binded

  2. agent must act in the interest of the principal: if a contract is entered into by an agent in a conflict of interest, it is voidable at the principal’s request, especially if the other party to the contract knew or should have known about the conflict

  3. agent must act within the limits of their authority: the agent must stay within the bounds of the authority granted to them by the principal

third parties may rely on the agent’s authority if their belief in the agent's authority was reasonable and without fault

→ if a third party does not request proof of authority, they may be considered to have acted "with fault" and cannot claim compensation if the contract is unenforceable

the agent must have the capacity to understand and intend, while the principal must have the capacity to act

a principal acting in bad faith cannot take advantage of an agent's ignorance or good faith

9. sham contracts

a sham contract occurs when the parties enter into a contract but concurrently agree that the obligations shall not be performed, creating a deliberate divergence between the parties’ declarations and their true intentions

types of sham contracts

  • absolute sham: the parties do not intend for the apparent contract to have any legal effect

  • relative sham: the parties intend a different legal relationship than what is formally presented

sham contracts generally have no legal effect on the parties involved

sham contracts can affect third parties, so they have rights

→ they can invoke the simulation against the contracting parties if the sham contract prejudices their rights or interests

10. indirect use of contract: fiducia v. trust

indirect use of contracts occurs when parties use a contract to achieve a result that is not explicitly stated in the contract terms, but is the actual purpose behind the agreement

these contracts are not sham contracts because the contracts concluded reflect the true interests pursued by the parties, albeit indirectly

a fiducia is a type of contract where one party (the fiduciant) transfers ownership of an asset to another party (the fiduciary), with an agreement that the fiduciary will hold the asset for a certain period or until a specified condition is met, after which it will be returned to the fiduciant or transferred to another person

a trust is a legal arrangement recognized in Anglo-Saxon jurisdictions where one person (the trustee) holds property in trust for the benefit of another (the beneficiary)

in a fiducia, the property remains part of the fiduciary’s assets, and thus is not protected from the fiduciary’s personal creditors and in a trust, the property is segregated from the trustee’s personal assets, providing strong protection against creditors of the trustee

fiducia is recognized under italian law and trusts are recognized if established under foreign jurisdiction that allows for it