Force majeure clause in Italian contracts. COVID-19

Force Majeure: “Act of God”

Does the  COVID-19 pandemic trigger a Force Majeure Clause in Italian Property Sales and Purchasing Contracts?

Also known as an “Act of God”, a Force Majeure clause in contracts is widely known, yet narrowly understood.

In general, a Force Majeure is an event that is beyond the control of either party to a contract. It prevents or hinder the performance of the contract.

Illness is a very unusual reason for causing a Force Majeure in contracts. However, the Coronavirus pandemic is not a common ailment. It has confined entire countries and restricted peoples’ movement and travel.

Recent disruptions have seen an increased number of calls from clients concerned about their responsibilities and rights regarding Italian property contracts.

A particularly frequent question is whether a Force Majeure clause exonerates vendors and buyers from performing contractual obligations?

What happens to Italian property contracts during Coronavirus restrictions?

Art. 91, 17 March 2020 n. 18 (“Decreto Cura Italia”) legislation deals with the liabilities for non-performance of a contract.

A party to a contract, who fails to perform contractual obligations shall be liable to pay damages unless it can be proved that the non-performance was caused by circumstances resulting from a cause beyond control (i.e. a Force Majeure).

The same law includes containment measures that limit movement, designed to prevent the spread of the Coronavirus disease. Failure to comply with these measures is a criminal offence under Article 650 of the Penal Code.

The issue of containment measures, and the restriction of movement, represent an obstacle in terms of completion of a Deed of Sale. Not only for those who may need to move from one Italian Municipality to another, but above all for people involved in cross-border real estate transactions.

Such containment measures may make it difficult and/or impossible to complete a Deed of Sale with a notary public.

Remedies

Extensions

Parties may be able to negotiate an extension to the contractual time limit for completion of a Deed of Sale.

Non-authenticated private deed

In order to avoid missing a contractual deadline, parties can also complete the Deed of Sale by means of a non-authenticated private deed.

In line with art. 1350 of the Italian Civil Code, parties will need to repeat the transcription and authentication process at an ulterior date. This will be possible once restrictions ease. Failure to have a Deed of Sale authenticated and transcribed later could render the Deed of Sale null and void.

Power of Attorney

By conferring a Limited Power of Attorney,  you can have someone act on your behalf in Italy. If you opt for a Power of Attorney, it is important that you entrust your affairs to a reliable and competent person such as a lawyer. Appointing someone who does not have enough experience or with whom there may be a conflict of interests, is highly inadvisable.

Use a holding account to protect your property payment

Our advice would be that you only use a bonded holding account to protect the balance of your payment for a property sale in Italy. Not just during the pandemic but always.  Known as a, “Deposito Prezzo” in Italian. You can arrange this with a notary public, who will act as guarantor for your transaction.

I am negotiating a Preliminary Contract for a property. Can I get a force majeure clause?

If you are in the process of negotiating the sale or purchase of a property in Italy, you should make sure that you include a “Force Majeure” clause in the Preliminary Contract. The clause should take into account a wide range of events. Not only natural disasters and catastrophic events but also disease epidemics and pandemics.

Finally …

If you are buying a property and need legal advice because of the pandemic, our legal professionals are here to provide help and guidance.

Please contact De Tullio Law Firm at the following email address info@detulliolawfirm.com

You may also be interested in our article about conferring a Power of Attorney. You may also like our info videos.