Data

Date:
28-11-2002
Country:
Arbitral Award
Number:
Court:
Camera Arbitrale Nazionale e Internazionale di Milano
Parties:
Unknown

Keywords

BUSINESS PURCHASE AGREEMENT - BETWEEN A UNITED STATES COMPANY AND A LUXEMBOURG COMPANY - CHOICE OF LAW CLAUSE REFERRING TO A DOMESTIC LAW (ITALIAN LAW)

CONTRACT INTERPRETATION - PARTIES' CONDUCT OR UNDERSTANDING PRIOR OR SUBSEQUENT TO CONCLUSION OF CONTRACT RELEVANT UNDER RULES OF INTERPRETATION OF THE APPICABLE LAW (ART. 1362 ITALIAN CIVIL CODE)

MERGER CLAUSE CONTAINED IN THE CONTRACT - DOES NOT AFFECT RULES OF INTERPRETATION OF THE APPLICABLE LAW

Abstract

A U.S. company and a Luxembourg company entered into a contract for the purchase of part of a third company owned by one of the parties. The contract was governed by Italian law.

A dispute arose as to the proper meaning of the price adjustment clause contained in the contract. One party argued that the clause in question was to be interpreted in the light of Article 1362 (2) of the Italian Civil Code, i.e. in accordance with the common intent of the parties to be determined in the light of their conduct or any agreement prior or subsequent to the conclusion of the contract. The other party, invoking a provision of their contract stating that "this agreement encompasses the entire understanding between the parties with respect to the subject matter of this agreement, and supersedes all prior agreements or statements regarding the subject matter and there are no representations, warranties, covenants, agreements, or collateral understandings oral or otherwise, express or implied, affecting this agreement if not expressly set forth or provided for herein", insisted that the parties' intention was only contained in the contract and that therefore any other understanding prior or subsequent to its conclusion was to be disregarded.

The Arbitral Tribunal confirmed that the provision in question was to be considered a so-called merger clause. However it held that such a clause simply indicates that there are no binding agreements between the parties other than those contained in the contract but does in no way affect the rules of interpretation established under the applicable law (in the case at hand, Art. 1362 of the Italian Civil Code. In reaching this conclusion the Arbitral Tribunal expressly referred, along with legal writings, to Art. 2.17 [Art. 2.1.17 of the 2004 edition] of the UNIDROIT Principles, as well as to the Comments which state "the effect of such a clause is not to deprive prior statements or agreements of any relevance: they may still be used as a means of interpreting the writting document".

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