Property LawItalian Law
Preliminary contracts and seller liability in Italian property law: Cassazione 8905/2025 on burden of proof, notice to perform and damages.
With judgment no. 8905 of 3 April 2025, the Italian Corte di Cassazione has further refined fundamental issues of Italian preliminary real estate contract law. At the centre of the decision are the standard of proof in cases of alleged defects, the meaning of contractual duties of good faith and the doctrinal basis for the calculation of damages where a preliminary contract is not performed.
The ruling, which stems from litigation originating in the 1990s, is characterised by a careful reconstruction of the facts and a systematic positioning of the relevant principles of contract law.
The case originated in a preliminary contract concluded in 1992 for the sale of a property which later turned out to have been built in part on land belonging to a third party. The purchaser consequently refused to conclude the final notarial sale contract, alleged breach of contract by the sellers and demanded repayment of double the deposit, the caparra.
The case originated in a preliminary contract concluded in 1992 for the sale of a property which later turned out to have been built in part on land belonging to a third party.
The sellers, for their part, sought meanwhile to acquire the missing strip of third-party land and then requested that the purchaser proceed to signature. After the purchaser continued to refuse, the sellers issued a formal notice to perform under Article 1454 of the Italian Civil Code, with the warning that failure to comply would result in termination. This ultimately led to termination by operation of law, risoluzione di diritto, of the preliminary contract.
After more than thirty years and several instances, the Cassazione again dealt with the case in order to clarify three key questions: who bears the burden of proof concerning the absence of defects or the legal ownership position; under what circumstances is a purchaser justified in refusing to conclude the final contract; and according to which criteria is damage to be calculated in the event of non-performance of a preliminary contract.
The Corte di Cassazione makes clear that the seller's good-faith ignorance of the partial third-party ownership of the land is presumed under Article 1147(3) of the Civil Code, unless evidence to the contrary is produced. In the specific case, the issue came to light only after the preliminary contract had been signed; the sellers then acquired the missing part of the land in order to secure transfer of ownership.
The consequence is that the purchaser may not refuse to conclude the final contract before the expiry of the agreed period so long as the seller remains objectively able to perform and to transfer ownership. This principle, already established in earlier case law, serves to preserve the synallagmatic balance in the phase between the preliminary contract and the final conveyance.
Of considerable practical importance is the Cassazione's statement regarding the formal validity of the diffida ad adempiere. Such notice remains valid even if it does not specify a concrete date or a specific notary, provided that it sets a defined period for performance. Under Article 1454 of the Civil Code, it is sufficient that the creditor sets a clearly delimited period within which the debtor must perform; an exact appointment is not required.
The purpose of the provision is not formal precision, but the definitive clarification of the parties' reciprocal legal positions. Therefore, a notice is effective even without indicating the exact place and time of the notarial appointment, so long as it leaves the debtor a reasonable period for performance.
Although this was not the direct dispute in the proceedings, the judgment confirms a principle that is now well established: if the purchaser alleges defects in the property arising between the preliminary contract and the final contract which frustrate the contractually intended use, the seller bears the burden of proving that the alleged defects do not exist or that he has complied with his obligation to deliver a defect-free and usable property.
This approach is based on Article 1218 of the Civil Code and on the principle of good faith in the performance of contracts. It obliges the seller to document carefully the condition of the property, for example by means of expert reports, photographs or inspection records, and to preserve the corresponding evidence. For the purchaser, the decision represents a noticeable procedural advantage, because he no longer has to prove the defects in every detail, but only has to make their existence plausible.
The Cassazione partially quashed the appeal judgment because the lower court had incorrectly assessed the seller's damages. These had been calculated as the difference between the auction price and the purchase price agreed in the preliminary contract, a criterion which the Court rejected as incorrect.
The Court formulated a new principle of law: in a preliminary contract for the sale of real estate, the seller's loss of profit is to be determined by reference to the difference between the price agreed in the preliminary contract and the market value of the property at the time of final non-performance; further circumstances may be taken into account provided that they are specifically pleaded, proven and reasonably foreseeable.
The Cassazione thereby emphasises that what matters is not the historical contract price or a later forced-sale price, but the real market value at the time of termination. There is no automatic compensatio lucri cum damno, namely no automatic offsetting of advantages against disadvantages. The purpose of damages is to compensate actual patrimonial loss, not to create a gain.
With express reference to Articles 1223 and 1225 of the Civil Code, the Court confirms that only direct, causally attributable and foreseeable damage is recoverable. The appellate court will therefore, in the further proceedings, have to determine the market value of the property at the time the termination became effective, that is, upon expiry of the notice period, and compare it with the contractually agreed price. Only from that difference can the actual loss of profit be derived.
For sellers: document comprehensively the condition and characteristics of the property before conclusion of the contract; retain all correspondence and any expert opinions; act proactively in the event of disputes in order to demonstrate good faith and contractual loyalty.
For purchasers: notify any defects immediately and in a comprehensible manner; examine whether the conditions for refusal to perform under Article 1460 of the Civil Code are met; avoid unjustified refusals, so as not to place oneself in default.
Judgment no. 8905/2025 of the Cassazione civile strengthens the principle of mutual contractual loyalty and substantive fairness in Italian real estate law. It obliges the seller to demonstrate the defect-free condition of the property and at the same time requires a realistic and timely assessment of damage in the event of termination. The ruling is also of considerable significance for notarial and legal practice: it shows that transparency, careful documentation and observance of good faith are not only ethical requirements, but also effective instruments of legal risk prevention.