How are damages dealt with in commercial contracts in Italy? Are liquidated (pre-agreed) damages common?

The amount of damages reimbursable in case of a contractual dispute takes into account the loss suffered by the creditor and the lost profits, insofar as they are a direct and immediate consequence of the non-performance or delay. If damages cannot be proved in their exact amount, they are equitably liquidated by the court.

Through a ‘penalty clause’ or a ‘liquidated damages clause’ the parties can agree in the contract the amount payable in case of breach, or delayed fulfilment, of an obligation.

Under the Italian laws such amount represents the maximum amount payable, unless the right to obtain reimbursement of additional damages is expressly reserved in the clause.

The amount due under the penalty or liquidated damages clause can be equitably reduced by the court in case the breaching party has partially fulfilled the underlying obligation and/or the amount in question is manifestly disproportionate.

Punitive (or exemplary) damages are not recoverable, even in the context of extra-contractual liability, since the principle of punitive damages is incompatible with the Italian legal system. Moreover, Italian courts have always refused to enforce foreign judgments encompassing payment of punitive
damages.

As of today, although a different trend may always arise, a similar judgment issued by a US Court against an Italian company would not be enforceable.

Discussion by Tommaso Mancini of Bacciardi and Partners in the Commercial Working Group Virtual Series.