LEGAL NEWS IN THE SPOTLIGHT | Italian Supreme Court on price adjustment clauses in sale and purchase agreements

On 5 April 2023, the Italian Supreme Court issued an ordinance in case No. 22198/2017 concerning price adjustment clauses under sale and purchase agreements (SPA). The ruling contains a thorough analysis of such clauses, which are typically intended to adjust the purchase price in the interest of one or both parties following the signing of an SPA based on a number of circumstances. A price adjustment clause referring to specific liabilities of the target company toward certain creditors that are (a) ascertained after the closing date and (b) related to events that occurred before the closing date complies with the principle of the certainty of the object of an agreement and must be deemed as valid and effective. The Supreme Court also (a) underlined the differences with the discipline of indemnity clauses (representing the main remedy for buyers in the event of any breach of representation and warranties by the seller), and (b) clarified that an agreement providing new terms and conditions relating to the purchase price entails the termination (novazione oggettiva) of the previous provisions under the SPA, provided that the parties are clearly willing to replace the former contractual obligations with new ones that are incompatible with those contained in the SPA.

Newsletter n. 95 – April 2024