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According to the most authoritative legal Scholars, the Italian Doctrine of Frustration occurs when a given objective situation of fact or law is – even in the absence of a specific agreement to that effect – reputed to be the implied condition upon which the contractors rely in order that the contractual agreement may continue.

According to the Italian Doctrine of Frustration – which is not expressly regulated by the Italian Civil Code) – a contract can be terminated in those situations in which the implied condition considered vital by both contractors for the continuation of contractual relations comes amiss or is not achieved for reasons that are not attributable to either of such parties.

In this case, the structure given by the parties to their respective interests would – according to the prevalent case law of the Italian Supreme Court (cfr., in particular, Supreme Court judgment n. 6631 of 2006) – now rest on a basis which is different from that which was agreed by them, leading to the termination of the contract pursuant to article 1467 of the Italian Civil Code (the aforementioned case concerned the termination of a lease agreement for a mill due to the fact that the river bed had been eroded to the point that the latter had dropped to a level which had led to the original mouth of the channel no longer being suited to collect water from the river).

A different view was taken, however, by the Italian Supreme Court in judgment no. 12235 of 2007, in which it ruled that since the Doctrine of Frustration concerns neither the subject-matter, the economic-social function of the contract or the purpose for which the parties entered into it, it must concern an external factor which – although not specifically adduced as a contractual condition – constitutes for both contractors (or for one of them only, provided that this is recognized by the other contractor) a specific and objective condition upon which the continuing validity of the contract hinges, which will entitle the contractors (who have placed reliance on it) to terminate the contract should it come amiss.

Mention should also be made of the position adopted by the Italian Supreme Court in judgment no. 16315 of 2007, according to which the doctrine of frustration applies to those situations in which a contractor no longer has an interest in the continuance of the contractual relationship (cfr. article 1174 of the Italian Civil Code).

We must point out, to this effect, that, pursuant to the aforementioned provision, the obligation the contractor is bound to perform must be economically quantifiable and must consist in an interest (also of a non-pecuniary nature) which the latter has in the contractual relationship.

The Supreme Court has thus held that in all-inclusive holiday travel (so-called package holiday) contracts, which are currently governed by articles 82 and ff. of Legislative Decree no. 206 of 2005 (the so called “Consumer Code”) .. the tourist purpose thereof is the reason for which the parties enter into the contractual agreement and is relevant not only for the purpose of qualifying such contractual relationship but also as regards the fate thereof, with the result that, within the overall function of such contract, the consumer’s inability to use the agreed through no fault of his or her own shall be considered – even though it is not specifically foreseen by provisions of law – a cause for termination of the contractual relationship, which is autonomous and distinct from the supervening total (pursuant to article 1463 of the Italian Civil Code) or partial (pursuant to article. 1464 of the Italian Civil Code) impossibility to perform such contract obligation.

These two minority positions (withdrawal or termination for lack of interest) do not, however, seem  in our opinion to be suitable to overcome the prevalent case law, according to which the coming amiss of the implied condition entitles the contractors to terminate the contractual relationship on account of it being excessively onerous.

This conclusion is supported by a recent decision of the Italian Supreme Court (judgment no. 10899 of 2010), which has asserted that a contract may be terminated pursuant to article 1467 of the Italian Civil Code on account of the fact that the implied condition upon which the parties relied upon entering into the contractual relationship shall lead, where it comes amiss, to such contract ceasing to have effect.

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