Commercial contracts normally include clauses which grant to one or both parties the right to stop the contractual relation, at certain conditions. But terminology may vary from a legal system to another.
Clauses regulating contract termination are very common in commercial contracts and their content in B2B relations can often be shaped by the parties.
In international business, however, it is important to consider that there may be significant differences among legal systems and terminology must always be used in compliance with the law applicable to the contract. A mere use of standard English terms can lead to misunderstandings or doubts in interpretation.
One of the most frequent clauses is the right of unilateral termination without a reason (in Italian, “recesso“): the party who decides not to continue a contractual relation is normally obliged to give prior notice to the other party. Under Italian law, in contracts with “continuing performance” (e.g. distribution, lease or service contracts) concluded for an indefinite time, parties are always allowed to withdraw, even if the contract does not provide so, as perpetual bonds are illegitimate. According to the case law, the notice must be appropriate and can be evaluated by courts. For example, the notice period must allow the other party sufficient time to find an alternative supplier, or to sell the stock. If courts find the notice period inappropriate, the exercise of the withdrawal can be considered as a breach of contract and give rise to damages.
If on the contrary an agreement with continuing performance is stipulated for a fixed time, parties can provide for tacit renewal, except in case one of them objects. The party who intends to terminate the relation has to send a notice (in Italian: “disdetta“) within a certain time before the expiry date. If no notice is sent, the contract will be renewed for another fixed term.
A different case is the right of termination allowed to a party due to contractual breach of the other party (“risoluzione per inadempimento“). Such a right derives from general principles of contract law and is always granted, even if it is not mentioned. According to the law, termination can be declared only in case of a serious breach (“inadempimento di non scarsa importanza”) while for minor breaches it is only possible to claim performance. Damages can be granted in case of fault.
The party suffering the breach can request the other party to stop or remedy the violation within a certain time, otherwise the contract will be terminated (“diffida ad adempiere“). If the contract does not state differently, the time cannot be less than 15 days. However, such a request is not an obligation or a pre-condition for termination, unless the parties decide so.
A particular clause regulated by Italian law is the express termination clause (“clausola risolutiva espressa“): the parties can agree that, in case one party does not correctly perform a certain obligation, even in case of minor breaches, the other party may declare termination (for more details see HERE).
Those stated above are general rules of contract law. Special rules apply for some specific contracts.
