The Milan Judges, with a non-definitive sentence, accepted the argument made by Insight Studio Legale according to which the preliminary contract for the acquisition of company quotas may still produce binding legal effects between the parties, if the circumstances of the case are such as to ensure the autonomy of the preliminary agreement from the subsequent final agreement.

The case in question concerned the acquisition by a Korean company of quotaholdings in a Romanian company which owns a photovoltaic plant located in Romania.

As part of this acquisition, the parties first entered into a “preliminary” contract governed by Italian law which provided for the competence of the Court of Milan in case of any dispute related to the agreement. Subsequently, the final acquisition contract was signed, which was instead governed by Romanian law and provided for arbitration in Milan for the settlement of possible disputes.

Following the signing of the final contract, the Korean buyer discovered that the guarantees issued in relation to the acquired Romanian company, as well as the photovoltaic plant owned by the latter, had been totally disregarded by the sellers.

For this reason, the Korean buyer and the purchased Romanian company together brought a civil action for damages before the Court of Milan against the sellers based on the preliminary contract, claiming that a series of guarantees contained therein had been violated by the sellers.

The defendant sellers joined the proceedings and objected, among other things, that the Italian courts lacked jurisdiction, that the Romanian courts were instead endowed with such jurisdiction and that the Court of Milan lacked competence. The sellers founded their arguments on the point that the final contract should supersede the effects of the preliminary agreement and that the final contract was therefore the only agreement capable of binding and producing effects on the parties, also with respect to the applicability of Romanian law.

In essence, the defendants argued that the provisions of the preliminary contract could not produce any effects given the occurred signing of the final contract. Consequently, they argued, not even the provisions of the preliminary contract relating to jurisdiction of the Italian courts could be applied.

The argument of the claimants, on the other hand, was that the preliminary agreement should necessarily continue to produce its effects because it contained guarantees that had not been included in the final agreement and such guarantees were, moreover, given by persons who did not sign the final contract.

In particular, the claimants argued that only the preliminary contract (and not the final one) contained guarantees that could protect the purchaser upon discovery – after the sale of the quotas – of circumstances that were not known nor could be known by the buyers. Furthermore, the verification of the exact fulfilment of these guarantees had to take place after the signing of the final contract, which was a circumstance that imposed a continuing effect of such guarantees even after the signing of the final agreement.

It was also pointed out by the claimants that these guarantees had been given by the holders of the company quotas, who had not signed the final contract for the sale of such quotas; it was precisely this additional circumstance that made a further difference, this time from a subjective point of view, between the contents of the preliminary and final contracts.

In this Firm’s opinion, the preliminary contract already provided for its survival with respect to the final contract, given that the signatories of both preliminary and final agreements did not coincide perfectly and that the obligations undertaken by the sellers and guarantors with the preliminary contract (which were later violated) were not recalled in the final agreement. Indeed, to state otherwise – i.e. to argue that the final contract superseded the prior preliminary contract – would have entailed the disappearance of a series of guarantees which were contained only in the preliminary agreement, as well as an unjustified and automatic release of the guarantors from their obligations by virtue of the mere fact of having signed the final contract.

The Court of Milan accepted the Firm’s arguments and rejected all preliminary exceptions raised by the defendants, stating that “the private agreement dated 2 April 2015 [i.e. the preliminary contract] is the only agreement reached between all the parties of these proceedings… Therefore, even though the final contract may have been concluded, the preliminary contract remains the only agreement that binds all the parties involved, and the content of such agreement cannot be considered superseded by the final contract … It must be concluded that in relation to the claims that have been made, and which are based on the obligations assumed by the defendants with the signing of the preliminary contract for the transfer of quotas … the jurisdiction of the Court of Milan exists by virtue of the express provision of Article 5.3 of said preliminary contract, which continues to maintain its full effect among all the parties present within this dispute“.

The Court’s decision is noteworthy because it runs counter to a well-established case law according to which the final contract normally supersedes the provisions contained in the preliminary agreement which, consequently, no longer binds the parties from the date of signing of the final agreement.

The case illustrated here therefore represents the development of a minority opinion that also gives protection to those clauses which have been prepared and drafted in such a way as to survive and continue to produce their effects despite the signing of a subsequent final agreement.