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Compensation due to the contractor in case of principal’s withdrawal from the building agreement

According to the decision of the Italian Supreme Court dated 22 November 2019 – 17 July 2020, n. 15304, in case of principal's withdrawal from a building agreement (“contratto di appalto”), pursuant to article 1671 of the Italian Civil Code, the burden of proving the net profit that the contractor would have achieved with the contracted works remains up to the contractor.

According to art. 1671 of the Italian Civil Code, “the principal may withdraw from the building agreement…., provided that the principal holds the contractor harmless and indemnified against the expenses borne, the work performed and the loss of profit”.

According to the decision of the Supreme Court recalled above, issued within a dispute between a condominium and a contractor, the burden of proving such loss of profit, i.e. the difference between the agreed overall price of the contract and the expenses which would have been necessary for the performance of the works, is borne by the contractor (in compliance with the general Italian rules regarding the burden of proof), without prejudice to the principal's right to prove that the interruption of the contract did not prevent the contractor from making replacement profit or, in any case, procured to the contractor other advantages.

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