Termination of contract by non-performance in the current Italian legal system
4. Nowadays a legal scholar should extend their research to include Uniform Private Law (see Convention on Contracts for the International Sale of Goods
-known also as CISG-, the Principles of European Contract Law -known also as PECL-, Unidroit Principles of International Commercial Contracts -known also as Unidroit Principles-, the Draft Common Frame of Reference -known also as Draft-) to understand our current legal system6. This widening of research does not mean that we are comparing our legal system with other legal systems because these rules belonging to Uniform Private Law are already part of our current system.
In detail, the Convention on Contracts for the International Sale of Goods is a hard law because it is an international convention signed by the Italian State. The Principles of European Contract Law, Unidroit Principles of International Com-mercial Contracts and the Draft Common Frame of Reference are soft laws. They derive from many national legal systems with the goal of becoming common law, that is law which would be common to different legal systems. Therefore they are increasingly taken into account by international arbitrators in arbitration awards and by national lawmakers in reforms of civil codes such as the reform of the French civil code.
The extension of this research shows that Uniform Private Law gives us another model of termination by non-performance. In this model a judgment is not neces-sary in order to terminate a contract7. The non-defaulting party can terminate a contract by a notice to the other party (see article 26 of CISG “A declaration of avoidance of the contract is effective only if made by notice to the other party”; article 9:303 of PECL “A party’s right to terminate the contract is to be exercised by notice to the other party”; article 7.3.2. Unidroit Principles “The right of a party to terminate the contract is exercised by notice to the other party”; article 3:507 “A right to terminate is exercised by notice to the debtor”). In other words the non defaulting party can be released from the contract without going to court. It is only necessary to go to court if there is a dispute on the termination of the contract.
4 See Iorio, Clausole di stile, volontà delle parti e regole interpretative. Profili generali, in Riv. dir. civ., 2008, 657; Id., Clausole di stile, volontà delle parti e regole interpretative. La prassi contrattuale, in Riv. dir. civ., 2009, 49; Bonilini, Le clausole contrattuali c.d. di stile, in Riv. trim. dir. e proc. civ., 1979, 1190; Coviello, Appunti sulle clausole di stile nei contratti, in Foro it., 1963, IV, 116; Messineo, Considerazioni sulle clausole contrattuali “di stile”, in Riv. trim. dir. e proc. civ., 1960, 27.
5 See Cass. 25 ottobre 2010, n. 21838, in Notariato, 2011, 8.
6 See Di Majo, Le tutele contrattuali, Torino, 2009, 29.
7 See Di Majo, Le tutele contrattuali, cit., 206, Fusaro, La risoluzione del contratto sulla via della codificazione europea, in Nuova giur. comm., 2004, 312.
Furthermore, in Uniform Private law the condition of the termination is that the non – performance is fundamental8. If the non-performance is fundamental, the non-defaulting party can terminate the contract by notice. Article 25 of CISG pro-vides that “A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result”. If the non- performance is not fundamental, the party may fix an additional period of time of reasonable length for performance of his obligations by the other party (see articles 47 and 63 CISG)9. Similarly article 7.3.1. of Unidroit Principles provides that a party may terminate the contract where the failure of the other party to perform an obligation under the contract amounts to a fundamental non-performance. This article specifies the cases in which a failure to perform an obligation amounts to a fundamental non-performance. “In determining whether a failure to perform an obligation amounts to a fundamental non-performance regard shall be had, in particular, to whether (a) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract unless the other par-ty did not foresee and could not reasonably have foreseen such result; (b) strict compliance with the obligation which has not been performed is of essence under the contract; (c) the non-performance is intentional or reckless; (d) the non-performance gives the aggrieved party reason to believe that it cannot rely on the other party’s future performance; (e) the non-performing party will suffer disproportionate loss as a result of the preparation or performance if the contract is terminated”.
The comparison between article 7.3.1 of the Unidroit Principles and article 25 of CISG shows that in the Unidroit Principles there is not the ambiguous word “det-riment” because it could mean either damage or a failure of expectation10. Further-more, the Unidroit Principles take into account not only what the parties have
es-8 On fundamental non-performance in the termination by non-performance in the Convention on Con-tracts for the International Sale of Goods, see Will, Sub art. 25, in Commentary on the International Sales Law, by Bianca, Bonell, Milano, 1987, 113; Bianca, La risoluzione del contratto per inadempimento: rifles-sioni sul confronto tra diritto italiano e convenzione di Vienna, in Scritti in onore di Angelo Falzea, II, t. 1, Milano, 1991, 121; Peleggi, Un esempio di applicazione del favor contractus quale principio ispiratore del sistema rimediale della Convenzione di Vienna sulla vendita internazionale di beni mobili, in Dir. commercio internaz., 2003, 877; Griffi, Divergences in the interpretation of the CISG: the concept of “fundamental breach”, in The 1980 Uniform Sales Law, a cura di Ferrari, Milano, 2003, 305; Ferrari, L’inadempimento essenziale nella vendita internazionale, 25 anni di art. 25 della Convenzione delle Nazioni Unite sui contrati di vendita internazionale di beni mobili, in Dir. commercio internaz., 2005, 59; Marocco, La risoluzione del contratto nella Convenzione di Vienna, in Nuovo dir. delle società, 2012, 106; Alpa, Bessone, Inadempimento, rimedi, effetti della risoluzione nella vendita internazionale di cose mobili, in Foro it., 1980, V, 251.
9 On the comparison between the Italian civil code and CISG regarding termination, see Bianca, La risoluz-ione del contratto per inadempimento: riflessioni sul confronto tra diritto italiano e convenzrisoluz-ione di Vienna, cit., 117.
10 See, Bianca, La risoluzione del contratto per inadempimento: riflessioni sul confronto tra diritto italiano e con-venzione di Vienna, cit., 122; Cubeddu, L’importanza dell’inadempimento, Torino, 1995, 209.
tablished in the contract, but also the intent or the fault of the non-performance, the lack of reliance on the future performance and the excessive loss of the non-per-forming party because of large initial costs or preliminary activities, in order to de-termine whether a non-performance amounts to a fundamental non-performance11. These last two benchmarks are crucial for long term contracts because in these con-tracts a relationship is created by the two parties who have spent a lot of money on large initial costs which could be amortized after a certain period of time12.
Article 8:103 of PECL provides that “A non-performance of an obligation is fun-damental to the contract if: a) strict compliance with the obligation is of the essence of the contract; (b) the non-performance substantially deprives the aggrieved party of what it was entitled to expect under the contract, unless the other party did not foresee and could not reasonably have foreseen that result; (c) the non-performance is intentional and gives the aggrieved party reason to believe that it cannot rely on the other party’s future perfor-mance”13.We can note that in the PECL the intent is considered only if it is linked to the loss of reliance on the future performance. Similarly article 3:502 of the Draft provides that “A non-performance of a contractual obligation is fundamental if: (a) it substantially deprives the creditor of what the creditor was entitled to expect under the contract, as applied to the whole or relevant part of the performance, unless at the time of conclusion of the contract the debtor did not foresee and could not reasonably be ex-pected to have foreseen that result; or (b) it is intentional or reckless and gives the creditor reason to believe that the debtor’s future performance cannot be relied on”. The Draft and the PECL contain the termination of contract regardless of the intent or the fault of the non-defaulting party which are considered only if they affect the reliance on future performance. This choice can be explained because termination of con-tract is different from liability14.
The conclusion we draw from these rules, although they are not fully overlap-ping, is that in Uniform Private Law parties can rule the termination of a contract, setting out when non-performance is fundamental. They can establish that the loss
11 On two opposing interests in the termination of contract: the interest of the non-defaulting party to be released from a contract in order to be able to request performance from others and the interest of the de-faulting party in a late performance because of non-recoverable costs occurred in preparing the perfor-mance, see Conte, L’uniformazione della disciplina giuridica della risoluzione per inadempimento e, in parti-colare, dell’anticipatory breach dei contratti, in Eur. dir. priv., 1998, 469.
12 On long-term contracts, see Osti, La così detta clausola “rebus sic stantibus” nel suo sviluppo storico, in Riv.
dir. civ., 1912, 46, Osti, Appunti per una teoria della “sopravvenienza” (la così detta clausola “rebus sic stanti-bus” nel diritto contrattuale odierno), in Riv. dir. civ., 1913, 413, Oppo, Obbligazioni e negozio giuridico, in Scritti giuridici, III, Padova, 1992, 200. On the costs of way-out in long-term contracts v. Delfini, Inadem-pimento e rischio contrattuale, Milano, 1999, 35.
13 On contract in the Principles of European Contract Law, see Castronovo, Il contratto nei principi di dirit-to europeo in Europa, in Eur. dir. priv., 2001, 791.
14 On the different roles of termination and liability, see Luminoso, Della risoluzione per inadempimento, in Comm. Scialoja-Branca, I, Bologna-Roma, 1990, 15, Grasso, Risoluzione del contratto ex art. 1453 c.c. e
“sanzione” per l’inadempimento, in Riv. dir. civ., 1990, 270, Id, Eccezione di inadempimento e risoluzione del contratto, Napoli, 1973, 32.
of reliance on the future performance or non-performance of minimal importance can be considered fundamental performance if the non-defaulting party cannot achieve what it was entitled to expect under the contract. In this model a judgment is not necessary in order to terminate a contract: therefore no judge checks that the non-performance is not of minimal importance with regard to the interest of the other in order to terminate a contract. In other words, in Uniform Private Law the parties hold the power to lay down the rules for the termination of contract, estab-lishing when non-performance is fundamental to fulfill the parties’ goals.