1. Private and Public law Invalidity and termination rights 1. Invalidity: is an agreement void and null or just voidable? 2. Termination of agreements 3. Penalties and restoration of damages

2. Invalidity

3. Invalidity of agreements _________________________________ -VALIDITY: the agreement formally complies with the general requirements set out by the law (e.g., real estate agreement must be incorporated in a written document; the subject matter must be lawful) -ENFORCEABILITY: the agreement is effective and may be actually enforced and performed by the parties

4. Invalidity of agreements _________________________________ Invalidity: -NULLITY: if an agreement is void and null it may not be enforced. Nullity arises by operation of law. -VOIDABILITY: an agreement is voidable, but is still enforceable as long as none of the parties requests a Court to have it voided (declared as null).

5. Invalidity of agreements _________________________________ Nullity An agreement is null and void if: -Conflict with mandatory provisions of law -Breach of fundamental requirements of agreements in general (e.g., agreement; object; formal requirements, if any, etc.) -The agreement was exclusively entered into in the light of illicit reasons (which are common to both parties) -The subject matter of the agreement was not clearly identified or identifiable

6. Invalidity of agreements _________________________________ A null agreement is not enforceable (so ineffective). In case of uncertainty, either party may apply for a declaration of the Court (there is no statutory period) Null agreement Invalid and unenforceable

7. Invalidity of agreements _________________________________ Voidability: -Either party was not in a position to enter into the agreement (unable to acquire rights and obligations) -The agreement was based on a party’s mistake, or his/her consent was obtained through fraud or violence

8. Invalidity of agreements _________________________________ A voidable agreement is enforceable (so effective), but may be declared void (by virtue of a declaration of the Court): if so, it is no longer effective Voidable agreement Invalid but enforceable

9. Invalidity of agreements _________________________________ An agreement might be: -invalid and unenforceable (null agreements) -enforceable but invalid (voidable) -…valid but unenforceable?

10. Invalidity of agreements _________________________________ Nullity: -of the agreement as a whole -of specific provisions only : what happens to the agreement? In such case: (A) the invalid clauses trigger nullity of the entire agreement; (B) the remaining clauses of the agreement survive

11. Invalidity of agreements _________________________________ More specifically: Nullity of specific provisions contained in the agreement (art. 1419 c.c.). In such case : (A)the invalid clauses trigger invalidity of the entire agreement: the parties wouldn’t have signed the agreement without those clauses (A)the remaining clauses of the agreement survive: the parties would have signed the agreement anyway; or the invalid clauses are replaced by other provisions by operation of law (e.g., 1815 c.c. on usury)

12. Invalidity of agreements _________________________________ Typical clauses avoiding the whole agreement from being declared void. Example (A) “If, at any time, any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision in any other respect or under the law of any other jurisdiction will be affected or impaired in any way”.

13. Invalidity of agreements _________________________________ Example (B) “If any law or regulation or any judgment, order or direction of any court, tribunal or authority binding upon the Bank in the jurisdiction in which it is formed or has its principal office or the office identified against its name in X or in which any action is required to be performed by it for the purposes of this Agreement, in each case which comes into force or becomes effective after the date of this Agreement, renders it unlawful or contrary to any regulation for the Bank to contribute to Advances or to maintain or fund the Facilities, the Bank shall promptly inform the Borrower and if it shall so be unlawful or contrary to any regulation for the Bank to contribute to the Advances its Commitment shall be reduced to zero. If it shall so be unlawful or contrary to any regulation for the Bank to maintain or fund the Facilities the Bank shall give notice to the Borrower requiring the Borrower to prepay the Total Outstandings on a future specified date not being earlier than the latest date permitted by such law, regulation, judgment, order or direction and the Borrower shall prepay the Total Outstandings in accordance with and subject to the terms of such notice and the provisions of clause X. Without prejudice to the reduction of the Commitment to zero or the obligation of the Borrower to make such prepayment, the Borrower and the Bank shall negotiate for a period not exceeding 30 days with a view to the Bank making available its Commitment and/or maintaining the Total Outstandings in whole or part in a manner which is not unlawful or contrary to any regulation”.

14. Termination rights

15. _________________________________ An agreement may be early extinguished in the following situations: -Mutual agreement of the parties -It is no longer possible to perform the obligations set out in the agreement -A material unbalance of the parties’ rights has arisen after execution of the agreement -Termination (breach of contract)

16. Termination rights _________________________________ An agreement may be terminated (“risoluzione”): -A breach of contract must have taken place -A Court decision is required -The breach must have a substantial impact on the parties’ rights (“inadempimento di non scarsa importanza”) -“clausola risolutiva espressa”: termination may happen even in case that the default has no real impact -Request for termination vs. request for the agreement to be performed -Performance may be suspended in case the the counterparty is in default

17. Typical termination clause: “ The Parties hereby agree that upon the occurrence of any of the Events of Default contemplated in Clauses XXX (Non payment and breach of purpose), XXX (Breach of other obligations) other than the Events of Default contemplated in Clause XXX, the Lender shall have the right to rescind the Agreement (“risolvere il contratto”) pursuant to article 1453 of the Civil Code. If an Event of Default listed in Clause XXX above is outstanding, the Lender may send a notice to the Borrower indicating that rescission event has occurred pursuant to article 1453 of the Civil Code and giving a term of [15 days] for the Borrower to remedy the relevant Event of Default. If the Borrower fails to remedy the Event of Default mentioned in the notice contemplated in Clause XXX above after the [15 day] term provided therein has expired, this Agreement shall automatically terminate with no retroactive effect on the expiry date of such [15 day] term”. Termination rights _________________________________

18. Termination rights _________________________________ “Solve et repete” clause A party may not refrain from performing his/her obligations, even in case that the counterparty is in default. No set-off rights or counterclaims may be raised to delay performance of the agreement Example: “Each payment to be made by the Borrower under the Finance Documents will be made in full, without any set-off or deduction”.

19. Termination rights _________________________________ “Solve et repete” clause - LIMITATIONS - such clause may not prevent a party from claiming nullity or voidability of the agreement; - the Court may at any time decide to suspend application of the “solve et repete” clause (e.g., in case that the counterclaims raised by the non- defaulting party appear to be well-grounded)

20. Penalties and restoration of damages

21. Penalties _________________________________ Penalty clause: the agreement sets out the amount which will be payable by the defaulting party the non-defaulting party is not required to provide evidence that a damage was created, nor of the damage amount

22. Penalties _________________________________ Penalty clause – breach of contract -Failure to perform contractual obligations -Delay in performing obligations

23. Penalties _________________________________ Penalty clause – limitations/drawbacks -The non-defaulting party may not obtain more than the amount specified in the penalty clause -The defaulting party may apply to Court, to obtain a reduction of the penalty amount, in case that the latter is considered as ‘unbalanced’ or unfair, or if the obligations at stake were performed in part by the defaulting party

24. Penalties _________________________________ The deposit (‘caparra’)

25. Penalties _________________________________ The “deposit” may have several functions 1.to “confirm” either party’s obligations (the other party would be entitled to retain the deposit amount in case of default); but, if the defaulting party is the subject receiving the deposit, he/she must return the double of the deposited amount. The non-defaulting party may request restoration of any further damages – “caparra confirmatoria” 2.to allow either party to unilateraly withdraw from the agreement (by letting the other party retain the deposit) – “caparra penitenziale”