“All Roads Lead to Rome”: The Multiple Grounds Under Italian Law to Challenge a Contract Due to Supervening Changes of Circumstances

Abstract

This paper focuses on the impact of the global financial and economic crises on the binding force of contracts from the perspective of Italian law. The analysis relies on a preliminary distinction between different factual consequences of the crises, in view of their potential availability as grounds for derogation to the principle “pacta sunt servanda”. The paper uses those factual circumstances as hypotheticals to illustrate the operation of Italian law, highlighting that impossibility of performance, supervening excessive onerousness of performance, excessive devaluation of the counter-performance and failure of presupposed conditions are all available doctrines under which an exception to the principle of “pacta sunt servanda” may be sought. The paper argues that all these different doctrines share the same rationale, that is the existence of an implied contract term of “rebus sic stantibus”, which may lead to the remedy of termination. The paper concludes that if any remedy is to be granted, termination is to be preferred to renegotiation or revision, as the former is more likely to lead to a reassessment of the price reflecting the new market conditions.