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Why your SPA's sole-remedy clause may not protect a seller — or a buyer — the way you assumed under Italian law
A seller received a warranty claim four years after the closing of an Italian share acquisition. The target's balance sheet, the buyer argued, had concealed a significant tax liability. The seller pointed to the SPA's indemnity cap and its sole-remedy clause. The Italian court looked past both. The claim held. / It stuck.
That outcome is not unusual. / This is not an isolated result. It reflects an established line of authority / settled case law from the Italian Court of Cassation (Corte di Cassazione), the supreme civil court in Italy, about how business warranties in a share purchase agreement interact with Italian limitation rules. If your deal involved an Italian target, the analysis below is not academic.
The answer depends entirely on what kind of warranty you are relying on.
Under the Italian Civil Code (codice civile), there are two distinct regimes. The first governs legal warranties — guarantees that the thing sold actually possesses the characteristics attributed to it (for example, that the shares are unencumbered and validly issued). Those warranties carry an eight-day notice obligation once the defect is discovered and a one-year limitation period under Articles 1495 and 1497 of the Italian Civil Code. Miss either and the claim is time-barred.
The second regime governs business warranties: the representations in your SPA about the target's assets, liabilities, tax position, litigation exposure and financial condition. These are contractual obligations, not legal warranties on the object of the sale. They are subject to the ordinary ten-year limitation period under Article 2946 of the Italian Civil Code.
The Italian Court of Cassation, Third Civil Division, judgment no. 11438 of 5 May 2023 (Cass. civ., Sez. III, sent. 5 maggio 2023 n. 11438) confirmed this distinction explicitly in the context of an M&A share purchase, holding that business-condition representations are autonomous contractual undertakings whose breach triggers the ten-year period. That is the leading authority. Your limitation analysis must start there, not from the SPA's notice provisions.
No. That is the single most expensive misreading of Italian M&A warranty law.
Many international SPAs drafted by common-law counsel include a warranty-claim period of twelve to twenty-four months from closing. The parties treat that provision as the limitation period. Under Italian law it is not. Article 2965 of the Italian Civil Code prohibits contractual terms that shorten a statutory limitation period to the point where exercising the right becomes excessively difficult. The Italian Court of Cassation has consistently held that a contractual cut-off of one or two years, applied to a ten-year statutory period, crosses that threshold.
The practical consequence is stark. A twelve-month warranty-claim deadline in your SPA — the kind routinely inserted by London or Toronto counsel following common-law market practice — will not bind an Italian court adjudicating a business-warranty claim. The seller who thought they were clean at month thirteen may not be. The buyer who let month fourteen pass without filing may still have eight years of window remaining.
Canadian buyers approaching this from their own practice will notice a sharp contrast. In Ontario, under the Limitations Act 2002, the basic limitation period is two years from the date the claim is discovered. Parties to a commercial agreement may, and routinely do, contractually shorten that period or agree to a specific claim deadline; Ontario courts enforce such provisions consistently. A two-year SPA warranty period is market-standard and legally effective under Ontario law.
Italian law runs in the opposite direction. The ten-year period is the floor for contractual obligations, and parties cannot contract below it where doing so would make the right excessively difficult to exercise. There is no concept equivalent to the Ontario discovery-based two-year cap that the parties can freely agree to reduce. A Canadian general counsel reviewing an Italian SPA through an Ontario lens will almost certainly underestimate both the buyer's exposure and the buyer's options.
Partially. This is the most commercially significant / consequentialuential point in this article, and the one most competitor analyses omit.
A sole-and-exclusive-remedy clause in an Italian SPA operates as a contractual limitation of liability. Article 1229 of the Italian Civil Code renders such clauses valid in principle — a seller can cap indemnity liability, exclude consequential loss, and require claims to be brought through the SPA mechanism rather than through general civil law remedies. Italian courts have upheld these structures in ordinary commercial deals.
The limit is absolute: Article 1229 also provides that clauses excluding or limiting liability for wilful misconduct (dolo) or gross negligence are void as a matter of public policy. They have no effect. A seller who knowingly concealed a material liability — an undisclosed tax assessment, an off-balance-sheet debt, a pending regulatory proceeding that was actively suppressed from the data room — cannot shelter behind the SPA's indemnity cap or its sole-remedy provision. The cap falls away. The buyer's remedy reverts to full damages under the general law.
The Italian Court of Cassation, United Civil Sections (Sezioni Unite), judgment no. 8770 of 28 April 2020 (Cass. civ., SS.UU., sent. 28 aprile 2020 n. 8770) addressed the interaction of contractual limitation clauses with dolo concealment in a commercial context, affirming that dolo defeats limitation-of-liability provisions as a matter of mandatory law. That principle applies directly to post-closing warranty disputes.
Operationally, this means that structuring your claim around evidence of deliberate concealment — not mere inaccuracy — is the most powerful strategy available to a buyer whose claim exceeds the indemnity cap or whose contractual notice period has elapsed.
Verba volant, scripta manent — spoken words fly away; written words remain. In Italian procedural law, documentary evidence of a claim is everything.
Three structural points matter at the drafting and claim-management stage.
First, claim notices sent by certified email (PEC — posta elettronica certificata, Italy's legally recognised electronic mail system) carry a statutory presumption of receipt under Legislative Decree no. 82/2005. Any SPA clause requiring notice by registered post is fine, but adding PEC as an alternative — naming a specific PEC address for each party — removes the delivery-dispute that delays more Italian proceedings than any substantive issue.
Second, escrow release mechanics should be drafted to require a written release agreement or a final arbitral award before funds are disbursed, rather than relying on the passage of a contractual claim period. As the ten-year period cannot be contracted away, an escrow that auto-releases at month twelve on the assumption that the limitation period has run is releasing funds that may still be subject to a live claim.
Third, Italian arbitration is overwhelmingly the preferred forum for post-M&A warranty disputes. The Milan Arbitration Chamber (Camera Arbitrale di Milano, CAM) and ICC arbitration seated in Milan are both well-suited to international SPAs. Where arbitration is not agreed, the specialist commercial division of the Milan Court (Sezione Specializzata in materia d'impresa del Tribunale di Milano) handles these cases in approximately eighteen to thirty-six months. Italian provisional attachment of assets (pignoramento — pignoramento, the court-ordered freezing of specific assets pending judgment) remains available even in arbitration-governed disputes, through the ordinary courts, and is a meaningful pressure tool for buyers pursuing a claim against a seller who has distributed post-closing proceeds.
This is where the structural risk is least visible to a Canadian transaction team.
Most international warranty and indemnity (W&I) insurance programmes are calibrated to English-law assumptions. They price the risk on the basis of the contractual claim periods in the SPA, assume those periods are legally effective, and underwrite accordingly. An eighteen-month claim period in the SPA is treated as eighteen months of exposure. Under Italian law — for the reasons set out above — that assumption is wrong. The actual exposure window may be ten years.
Where a policy expressly incorporates the SPA's contractual claim deadline as the outer limit of coverage, a buyer relying on that policy for Italian business-warranty claims faces a coverage gap that grows every year the claim is not pursued. A buyer with a live claim at year three, year five or year eight may find that the insurer has priced and reserved for eighteen months of risk — and the policy terms follow the SPA period, not the Italian statutory period.
The practical consequence for a Canadian acquirer is that pre-closing W&I due diligence for Italian targets should include an explicit review of whether the policy's outer limit aligns with Italian statutory limitation, not merely with the SPA's notice provisions. Adjusting the insured period to match the ten-year window increases premium but removes the mis-pricing risk.
In our files, the most common mistake is treating the SPA's warranty-claim deadline as equivalent to the Italian limitation period and allowing it to pass without filing a protective claim. The second most common is failing to obtain evidence of the seller's state of knowledge at closing before commencing the arbitration — the difference between a capped indemnity claim and an uncapped dolo claim is almost always proved or lost in the data-room exchange records and the representations made during management presentations.
Our SPA says all warranty claims must be brought within 18 months of closing. We are at month 22 and have just discovered a concealed liability. Do we still have a claim under Italian law?
Possibly yes. Article 2965 of the Italian Civil Code may prevent that contractual deadline from extinguishing your claim if it makes the right excessively difficult to exercise. More importantly, if the concealment was deliberate, Article 1229 makes the limitation clause void in any event. You should take Italian law advice immediately: the ten-year statutory period from the date of closing is the outer limit, but documentary evidence degrades and witness recollections fade. Month 22 is not too late, but it is time to act.
An attachment of assets (pignoramento) against the seller entity is possible through Italian courts even where the seller has distributed proceeds, provided the entity still holds recoverable assets. If the seller is a special-purpose vehicle that has been wound down, you may need to pursue the action against the natural persons or entities who received the distribution, depending on the corporate structure and the facts. This analysis is fact-specific and requires prompt action to prevent further dissipation.
Choice of law is enforceable in Italian M&A contracts. However, where the SPA is governed by English or Ontario law, Italian courts and arbitral tribunals applying Italian procedural law may still apply Italian mandatory provisions — including Article 1229 on dolo and Article 2965 on limitation waivers — if they are classified as overriding mandatory rules (norme di applicazione necessaria) under Regulation (EC) 593/2008 (Rome I). The interaction is not resolved by a governing-law clause alone. Your transaction documents should be reviewed by counsel experienced in Italian law before the governing-law clause is finalised.
HREFLANG BLOCK:
Editorial Team — Panato Law Firm Staff
