Breach of Contract Under Italian Law: Legal Remedies for Foreign Companies

When an Italian counterpart fails to perform its contractual obligations correctly — failing to deliver goods, withholding payment, performing defectively — a foreign company needs to know exactly which tools Italian law makes available in response. The Italian Civil Code governs breach of contract through a precise system of remedies, partly alternative and partly cumulative, set out in Arts. 1453–1462 c.c.

This guide focuses specifically on the remedies available in the event of breach, building on the general structure of Italian commercial contracts already covered in Commercial Contracts in Italy: What Foreign Companies Need to Know. For the preliminary step of formally demanding performance from the debtor, see The Formal Notice to Comply (Diffida ad Adempiere) Under Italian Law.

The General Framework: Remedies Under Art. 1453 c.c.

Art. 1453 c.c. is the cornerstone provision: in contracts involving reciprocal obligations, where one party fails to perform, the other may elect to seek either performance or rescission of the contract (risoluzione), and in either case retains the right to damages.

Three elements are essential to understanding how this system operates:

• Mutual exclusivity: the non-breaching party must choose between seeking performance or rescission. It is always possible to switch from a claim for performance to a claim for rescission during the proceedings, but not the reverse once a claim for rescission has been brought — and in any event not in the closing written submissions (comparsa conclusionale).
• Cumulative damages: regardless of the choice between performance and rescission, the non-breaching party is always entitled to damages for the loss suffered.
• Materiality of the breach: to obtain rescission, the breach must be of more than minor importance (Art. 1455 c.c.), having regard to the other party’s interest. A minor or marginal breach does not justify rescission of the contract, although it may still give rise to a claim for damages.

On the right of election under Art. 1453 c.c. — Cass. civ., Sec. II, order no. 12565/2024: it is permissible to switch a claim from performance to rescission, but not the reverse once the latter has been brought, and in any event not in the closing submissions. Such a switch is admissible only if it remains within the same facts underlying the original breach (Cass. no. 3502/1999); if new facts are introduced giving rise to a different cause of action, procedural preclusions apply. Cass. no. 19826/2004: the right of election is not exhausted by a judgment ordering performance — a party may bring a claim for rescission even after a final judgment on performance, where the breach continues thereafter.

The Action for Performance

The non-breaching party may choose to seek specific performance of the contract instead of rescission. This option is particularly suited to cases where performance remains possible and the creditor has an interest in actually receiving it, rather than being compensated.

• Specific performance in kind (Arts. 2930–2932 c.c.): for obligations to deliver a determinate thing or to enter into a contract (e.g. a preliminary contract), the creditor may obtain a judgment producing the same effects as the contract that was not concluded or the performance that was not rendered.
• Performance by equivalent: where specific performance in kind is not possible (e.g. non-fungible obligations to do something), the creditor may only obtain damages equivalent to the value of the missing performance.

For monetary obligations — the most common case in commercial relationships — the action for performance translates into a claim for an order to pay, frequently pursued through the injunction order where the debt is documented. For a full practical guide: How the Decreto Ingiuntivo Works in Practice: A Step-by-Step Guide for Foreign Creditors.

Rescission of the Contract

Rescission (risoluzione) terminates the contractual relationship and releases both parties from their reciprocal obligations, with retroactive effect between the parties (Art. 1458 c.c.) — except in contracts for continuous or periodic performance, where rescission does not affect performance already rendered.

Judicial Rescission

The “default” remedy is judicial rescission: the non-breaching party brings a claim before the court, which assesses the existence of the breach, its materiality, and pronounces rescission by judgment. This route requires the ordinary timelines of Italian civil proceedings.

Rescission by Operation of Law: Three Accelerated Mechanisms

The Civil Code provides three instruments that allow rescission to be obtained without waiting for a judgment, producing the rescissory effect automatically upon the occurrence of specified conditions:

• Formal notice to perform (diffida ad adempiere, Art. 1454 c.c.): the non-breaching party gives the counterpart written notice to perform within a period of not less than 15 days (unless otherwise provided by the contract or by trade usage), stating that the contract will be deemed rescinded if that period expires without performance. If the debtor fails to perform, the contract is rescinded by operation of law, without the need for any further constitutive court ruling. For a full treatment of this instrument: The Formal Notice to Comply (Diffida ad Adempiere) Under Italian Law.
• Express termination clause (clausola risolutiva espressa, Art. 1456 c.c.): the parties may agree contractually that the contract will be automatically rescinded if a specific obligation is not performed in the manner agreed. Rescission takes effect when the interested party notifies the other that it intends to rely on the clause.
• Essential time limit (termine essenziale, Art. 1457 c.c.): where a deadline fixed for one party must be regarded as essential to the interest of the other, the contract is automatically deemed rescinded if performance is not rendered within that deadline, unless the interested party gives notice within three days that it nonetheless wishes to demand performance. This rule applies unless otherwise agreed or established by trade usage: the parties may therefore contractually depart from the mechanism — for example, excluding it altogether or modifying the three-day notice period.

For a foreign company, including an express termination clause in contracts with Italian counterparts is strongly advisable: it allows for a rapid response to specific breaches without having to resort to a formal notice to perform or to litigation, reducing both time and uncertainty.

Damages

Regardless of the choice between performance and rescission, the non-breaching party is entitled to damages (Art. 1453, final paragraph, c.c.), governed by the general principles set out in Arts. 1223–1229 c.c.

• Actual loss and loss of profit (danno emergente and lucro cessante, Art. 1223 c.c.): compensation covers both the loss suffered (e.g. costs incurred, damaged goods) and the lost profit (e.g. profits that would have been earned had the contract been correctly performed), provided they are an immediate and direct consequence of the breach. This immediate and direct causal link is an essential requirement: losses that are too remote or indirect in relation to the breach are not compensable.
• The foreseeability limit (Art. 1225 c.c.): for non-wilful breach, damages are limited to the loss that the debtor could foresee at the time the obligation arose — not necessarily at the time the contract was concluded. In contracts of duration or with deferred obligations, the two dates may not coincide: an obligation arising at a point in time after the contract was signed (for example, a new order placed under a framework agreement) must be assessed by reference to the foreseeability of damage as at that later date, not the date of the original contract. This limit does not apply in cases of wilful breach.
• Duty to mitigate damage (Art. 1227, para. 2, c.c.): damages are not payable for losses that the creditor could have avoided by exercising ordinary diligence. This principle requires the injured party to take reasonable steps to limit its own losses — a concept familiar to Anglo-Saxon companies accustomed to the doctrine of mitigation.
• Contributory fault of the creditor (Art. 1227, para. 1, c.c.): where the creditor’s conduct has contributed to causing the damage, compensation is reduced proportionately.

The Penalty Clause: Pre-Determining Damages

The parties may pre-determine contractually the amount of compensation due in the event of breach through a penalty clause (clausola penale, Art. 1382 c.c.). The penalty clause relieves the creditor of the burden of proving the actual extent of the loss suffered — a significant advantage in terms of certainty and litigation costs.

An Italian court may reduce the penalty on equitable grounds in two situations provided for by Art. 1384 c.c.: where it is manifestly excessive in relation to the creditor’s interest in performance, or where the principal obligation has been partially performed. This power of reduction may be exercised by the court even of its own motion — without the debtor requesting it — in protection of a general interest of the legal system, and is exercisable even where the parties have expressly agreed that the penalty is not reducible. The court’s own-motion power, however, presupposes that the excessiveness emerges from the evidence already before the court (ex actis): the judge cannot investigate the matter independently, and the burden of pleading and proving the relevant circumstances rests on the interested party.

This power of judicial intervention has no direct equivalent in many common law systems and should be borne in mind when negotiating the amount of a penalty clause in a contract governed by Italian law.

Full Court on own-motion reduction — Cass. civ., Full Court (Sezioni Unite), no. 18128/2005: the power to reduce a penalty may be exercised by the court of its own motion, both where the penalty is manifestly excessive and in the case of partial performance, in protection of a general interest of the legal system. Cass. civ., Sec. III, no. 15753/2018: the power of reduction is exercisable of the court’s own motion even where the parties have agreed that the penalty is not reducible, in application of the principle of solidarity. Cass. civ., Sec. III, no. 3297/2024: own-motion reduction is admissible even after voluntary payment of the penalty, with a consequent obligation to refund the excess — the reliance of the party that received payment cannot be protected against the court’s own-motion power. Cass. civ., Sec. III, no. 22747/2013 and Cass. civ., Sec. II, order no. 24732/2017: the own-motion power presupposes that the excessiveness emerges ex actis from evidence properly before the court, with the burden of pleading and proof resting on the interested party.

The Plea of Non-Performance

In contracts involving reciprocal obligations, a party may refuse to perform its own obligation where the other party has not performed, or has not offered to perform simultaneously (exceptio inadimpleti contractus, Art. 1460 c.c.). The provision operates on two distinct levels: the first paragraph excludes the remedy where the deadlines for performance of the two obligations are different (a party due to perform later cannot refuse before its own deadline has passed); the second paragraph imposes a general requirement of good faith, excluding the plea where refusal would be contrary to good faith having regard to the circumstances.

This remedy is particularly useful as an immediate form of self-help: it requires neither court intervention nor a prior formal notice, and may be raised for the first time even in the course of litigation. However, where invoked as a defence in court proceedings, it must be raised promptly in the statement of defence (comparsa di risposta) — being a defence in the strict sense, a defendant who enters an appearance late forfeits the ability to raise it.

Nature and timing of the plea — Cass. civ., Sec. II, no. 17214/2020: the plea of non-performance does not require a prior formal notice and may be raised for the first time in the course of proceedings, not being subject to any formal precondition. Cass. civ., Sec. II, order no. 19753/2025: the plea of non-performance is a defence in the strict sense, subject to forfeiture under Art. 167, para. 2, of the Code of Civil Procedure: it must be raised in a timely statement of defence, on pain of forfeiture for late appearance by the defendant.

Distinction from rescission — Cass. civ., Sec. III, no. 1690/2006: the standards of assessment under Art. 1460 and Art. 1455 c.c. are distinct: the former serves to preserve the contractual balance (sinallagma) and requires a comparative assessment between the two breaches, while the latter serves to dissolve the contract and requires an objective assessment of severity. A breach may therefore justify the plea under Art. 1460 c.c. without being sufficiently serious to ground rescission of the contract. Cass. civ., Sec. II, order no. 5071/2025: good faith under Art. 1460 c.c. is to be understood objectively — it is necessary to assess whether the breach has affected the contractual balance, causally and proportionately, so as to justify suspension of the counter-performance.

Rescission for Supervening Impossibility

A remedy distinct from those described so far concerns cases where performance becomes impossible for a reason not attributable to the debtor (Arts. 1463–1466 c.c.) — for example, a force majeure event, a supervening regulatory measure, or the destruction of the contractual subject matter without fault on either side.

• Total impossibility (Art. 1463 c.c.): the contract is rescinded by operation of law, and the party released from its own performance cannot demand the counter-performance; if it has already been received, it must be returned under the rules on restitution of undue payments.
• Partial impossibility (Art. 1464 c.c.): the other party is entitled to a corresponding reduction in its own performance and may withdraw from the contract if it has no appreciable interest in partial performance.

For foreign companies, this regime is particularly relevant in international supply contracts affected by unforeseen events (logistical disruptions, sanctions, natural disasters). Unlike force majeure as an Anglo-Saxon contractual concept — which operates only where expressly provided for in a clause — supervening impossibility under Italian law is a statutory institution that applies even in the absence of a specific clause, although it remains good practice to address it contractually to avoid interpretive uncertainty.

Choosing the Right Remedy: A Practical Comparison

For the foreign company managing a breach, the choice among the available remedies depends on a practical assessment:

• If the debt is documented and liquidated (invoices, written contract): the injunction order, often the fastest tool.
• If the goal is to exit the contract quickly without waiting for a judgment: a formal notice to perform (where there is no termination clause) or invoking the express termination clause (where one exists).
• If the primary interest is receiving the performance (rather than damages): the action for performance, potentially in specific form.
• If the counterpart has not yet performed and you wish to withhold your own performance: the plea of non-performance, available immediately without any judicial formality.

Frequently Asked Questions

Can I claim both rescission of the contract and damages?

Yes. Damages are always cumulative with either a claim for performance or a claim for rescission (Art. 1453, final paragraph, c.c.). What cannot be combined is a claim for performance with a claim for rescission: these are alternative remedies, and once a claim for rescission has been brought, it is no longer possible to revert to seeking performance.

I included an express termination clause in the contract. Do I still need to send a formal notice?

No. If the express termination clause is validly drafted and the breach of the specifically identified obligation has occurred, it is sufficient to notify the counterpart that you intend to rely on the clause. The 15-day period required for a formal notice to perform is not necessary, nor is court intervention.

My Italian supplier delivered the goods two weeks late. Can I rescind the contract?

It depends on the seriousness of the delay relative to the contractual interest at stake. If the delivery deadline was not essential and the delay did not significantly impair the usefulness of the performance for you, rescission could be denied by the court on the grounds that the breach was not sufficiently material (Art. 1455 c.c.). If, on the other hand, the deadline was essential (e.g. seasonal goods) or the delay caused significant loss, rescission is generally justified.

The penalty clause in my contract is very high. Can an Italian court intervene?

Yes. An Italian court may reduce a penalty on equitable grounds where it is manifestly excessive in relation to the creditor’s interest in performance, even of its own motion and even where the parties have agreed that the penalty is not reducible (Cass., Full Court, no. 18128/2005). This power, however, presupposes that the excessiveness emerges from material already before the court — it is therefore advisable for the interested party to plead and document the relevant circumstances, rather than relying on the court’s own initiative.

Conclusion

The system of remedies for breach of contract under Italian law offers foreign companies a flexible range of tools, from immediate, out-of-court mechanisms (the plea of non-performance, the express termination clause) to those requiring court intervention (judicial rescission, the action for performance). Choosing the right remedy, calibrated to the specific situation, can make the difference between a fast, low-cost solution and prolonged, expensive litigation.

Prevention remains the most effective tool: contracts drafted with well-calibrated express termination clauses, proportionate penalty clauses, and clear performance deadlines drastically reduce the risk of complex disputes in the event of a breach by an Italian counterpart.

For assistance in managing a breach of contract or drafting contractual clauses to protect your interests, Studio Legale Giorgianni is available. Further information is available in the Italian Business Lawyer section and on our Italian Lawyer hub page.