PRE-CONTRACTUAL LIABILITY UNDER ITALIAN LAW: WITHDRAWAL FROM NEGOTIATIONS – AN OVERVIEW OF COURTS’​ RULING.

According to Art. 1337 of the Italian Civil Code, the parties, during the negotiations and in the formation of the contract, must behave according to good faith. The breach of the duty of good faith results in pre-contractual liability.
Among the behaviors that can entail a pre-contractual liability is the withdrawal from the negotiations without a just cause, which occurs when negotiations have reached such a point that the counterpart is confident in the eventual execution of the contract.
During the negotiations, not only the parties must behave according to good faith, but also diligently. This means that the pre-contractual liability can be grounded in lack of good faith but also in lack of diligence or loyalty, i.e. in fault or fraud, according to the rule of non-contractual liability (2043) outlining the general principle of respect for other people’s rights (neminem laedere).
The exact nature of the pre-contractual liability is in fact debated between those who believe that is liability for tort (art. 2043) and those who consider that is a contractual liability (art. 1218) deriving from the breach of a specific obligation. The traditional leaning of Supreme Courts’ ruling (among others Court of Cassation n. 15040/2004 and n. 16735/2011), is that art. 1337 outlines a peculiar form of non-contractual liability.
From the contractual or non-contractual nature of the responsibility, derive specific consequences in terms of timeframe, burden of proof, recoverable damages among others.
In support of the non-contractual nature of pre-contractual liability, Courts have argued that since the parties are free to execute the contract or not, no obligation is arising prior to its conclusion.
Consequently, any obligation to compensate in case of unjust withdrawal could only derive from intentional or negligent behavior that is a non-contractual offence. Moreover, Courts have argued that the breach of good faith in the negotiation phase does not constitute a breach of a specific obligation, but only of a generic duty of conduct. A contractual obligation would provide instead a given duty towards a specific person, and more specifically that of protecting the counterpart’s interest; the obligation of good faith, on the contrary, would weigh towards all persons, for the protection of the general interest in fair conduct of the negotiations. It would also be pre-existing the negotiations.
The arguments brought by supporters of non-contractual liability have been on the other hand strongly disproven by other authors, who reply that there is in fact a specific obligation that is the obligation of good faith provided for in article 1337. Moreover, the most recent tendencies of Supreme Courts (Court of Cassation 12/07/2016 n. 14188), and subsequently also of Merit Courts, regard those of good faith and fairness as sources of a specific obligation to the contractors.
According to said authors and Courts, the assertion that the obligation of good faith would weigh on everyone and be pre-existing the negotiations is meaningless, because the law specifically addresses such duty to those engaging in negotiations. Otherwise, article 1337 would be unnecessary because the same result could be obtained by applying article 1175 (correct behavior) and 2043 (liability for tort). Consequently, according to such more recent guidelines, pre-contractual liability should instead be construed as contractual liability, as an extension to the negotiations of the general obligation of good faith that must be complied by the parties in the execution of the contract (art. 1375).
As said, among the pre-contractual duties of good faith, that of not withdrawing from the negotiations without just cause is configured whenever those who created in the counterpart a legitimate reliance in order to the eventual execution of the contract, withdraw without justification causing damages to the counterpart.
Recently the Court of Milan has ruled (No. 4297/2017 – Court of Milan- Specialized Section for Enterprises matters) that for the subsistence of pre-contractual liability, in accordance with art. 1337 of the Italian Civil Code the duty of good faith in the negotiations must be considered in an objective way, so that conduct of the party interrupting the negotiations without a just cause is considered regardless of it being intentional or not, merely negligent or deliberate, to the extent that such conduct objectively eluded the counterpart’s expectations in that, trusting in the execution of the contract, incurred expenses or waived more favorable occasions.
As regards the recoverable damages, Italian law recognizes only two categories: “Indemnification of damages for contractual breach or delay in performance must encompass both the loss suffered by the creditor and the lack of profits, in so far as they are the direct and immediate consequence thereof” (art. 1223).
Direct and immediate loss stands for any loss or payment which impairs the assets (goods, values, etc.) which are already existing to the benefit of the creditor when the damage is suffered (e.g. loss of value of assets, monetary disbursements, etc.). Direct and immediate lack of profits stands for the loss of chance of gaining those assets (goods, values, etc.) which, had the breach not existed, the creditor would have gained (e.g. lost profits).
It is finally essential to note that in all and any of the above cases, the damage is recoverable if, and to the extent, it is the direct and immediate consequence of the breach or behavior. This is the so called “causal link”.
The adjectives “direct” and “immediate” must (and can) not however be interpreted literally. The right interpretation is that a “causal link” between a given event and the damages exists if, without such event (also as part of a broader series of events), said damages would not have occurred in the way (time, magnitude, etc.) they have occurred. The concept of “causal link”, as interpreted by Courts, allow to avoid that a single event may trigger an infinite chain of damages.
© Avv. Anna Massimini – All rights reserved