Confirmatory Deposit: Why Silence, Once the Term Has Expired, Costs More Than the Other Party's Breach

Anyone who practises real estate law knows the scene well. The deadline for the notarial deed has expired. The preliminary agreement contains the phrase "no later than", perhaps accompanied by the words "essential term" printed in bold. The buyer has not shown up. The seller, convinced that the law is on his side, keeps the deposit and puts the property back on the market.

Then the writ of summons arrives. And with it, very often, the order to return the deposit.

A recent judgment of the Court of Naples, No. 8816 of 27 May 2026, has brought back into focus an issue that legal practice continues to underestimate: the confirmatory deposit (caparra confirmatoria) is not an automatic mechanism. It is not enough for the contract to have fallen through. Nor is it enough for the counterparty to have remained inactive. To retain the deposit, three things are required: an attributable breach of contract, active conduct on the part of the party invoking retention, and — at the procedural level — an express claim to that effect.

The magic formula that does not exist

Let us start with the first misconception. The phrase "no later than", which appears in thousands of preliminary agreements, does not turn a term into an essential one by decree. The Court of Cassation has repeated this for decades: the term set for the execution of the final deed does not normally constitute an essential term. It is essential only when it unequivocally reflects the parties' intention that, once the term has expired without performance, the benefit they sought to obtain from the contract is to be regarded as definitively lost (Court of Cassation, Civil Division II, Order No. 5360 of 2023).

Essentiality cannot be inferred from the phrase "no later than" alone, especially where it does not emerge from the subject matter of the transaction or from specific indications that the parties intended to treat the benefit of the contract as lost upon expiry of the term (Court of Cassation, Civil Division II, Order No. 28 of 2024). The parties' subsequent conduct is decisive: if, after the deadline, they continue to negotiate, exchange documents, or request extensions, there is no essential term. Full stop.

The practical consequence is significant: if the term is not essential, termination does not occur automatically. What is required is either a formal notice to perform under Article 1454 of the Civil Code, or a judicial finding of a breach that is not of minor importance.

Mutual inaction: when nobody wins

This is where the second aspect comes in — arguably the most interesting part of the Naples judgment. The court found that the buyer had remained inactive, having neither chosen the notary nor communicated a date for the deed, despite being contractually obliged to do so. But the seller, too, had remained still: no formal notice, no notice of default, no initiative whatsoever. The court concluded that mutual inaction rules out attributing sole responsibility for the failed deed to either party alone.

This is a concrete application of the principle whereby, when assessing breach of contract in order to determine which party is entitled to withdraw, a comparative evaluation of both parties' conduct must be carried out, to establish which of them, through its own conduct, caused the other to lose interest in maintaining the agreement (Court of Cassation, Civil Division II, Order No. 28568 of 2024; Court of Bolzano, Judgment No. 717 of 2025).

The corollary is essential: in a progressively formed contract such as a real estate preliminary agreement, both parties bear duties of cooperation and good faith. A seller who simply watches the deadline pass, trusting that the deposit will be forfeited to him, makes a strategic error. He loses the deposit and, often, the costs of the proceedings as well.

The deposit: withdrawal, not termination

The third misconception concerns the very nature of the claim. Article 1385, paragraph 2, of the Civil Code grants the non-defaulting party the right to withdraw from the contract while retaining the deposit. This is not an automatic consequence of termination: it is a right that must actively be exercised.

Case law has drawn this distinction in unambiguous terms. Withdrawal under Article 1385 of the Civil Code constitutes a special instrument of extrajudicial termination of the contract, which presupposes a breach that is seriously culpable and not of minor importance (Court of Cassation, Civil Division II, Judgment No. 2969 of 2019). The assessment of seriousness must be carried out according to the criterion set out in Article 1455 of the Civil Code, taking into account the actual impact of the breach on the contractual balance of obligations.

And this is where the most delicate point arises — the one on which the Naples court built its decision.

The counterclaim: the elephant in the room

A defendant wishing to retain the deposit must bring a specific counterclaim. It is not enough to plead a right of retention in the statement of defence. Nor is it enough to argue that the buyer was in breach. What is required is a claim seeking a judicial finding of the right to withdraw and to retain the deposit.

The Naples judgment states this clearly: the defendant who intends to neutralise the restitutory effects of termination by relying on the right to retain the deposit is required to bring a specific counterclaim seeking a finding of that right, which cannot be regarded as implicit in the contractual provision alone, nor automatically enforceable.

This principle is not an isolated one. The Court of Cassation has already clarified that recognition of the right to retain the deposit presupposes a finding of the counterparty's serious, attributable breach as the constitutive fact underlying that right (Court of Cassation, Civil Division II, Order No. 66 of 2025). And such a finding requires, at the procedural level, a claim properly framed as such.

There is a further clarification that completes the picture. When it is the non-defaulting party who brings proceedings, a claim for termination accompanied by a request for the return of double the deposit implicitly contains a claim for withdrawal, which the court has the power — and duty — to reclassify as a matter of law (Court of Cassation, Civil Division II, Order No. 91 of 2024; Court of Cassation, Joint Divisions, No. 553/2009). But this reclassification carried out by the court of its own motion operates in favour of the claimant seeking the deposit, not the defendant who merely defends the claim.

The logical order of the issues

There is a further lesson running through all recent case law that deserves to be brought together systematically. A court hearing a claim for termination based on expiry of a term must follow a precise logical-legal sequence, as set out by Court of Cassation Judgment No. 10682 of 2023:

1. determine whether the term is essential in nature, assessing the parties' conduct solely for the purpose of reconstructing their contractual intent;

2. if the term is essential, establish whether it was set for the benefit of one party alone or of both, and, in the latter case, determine to whom its expiry is attributable;

3. only if the term is not essential, proceed to an overall assessment of the parties' conduct to verify whether there is a breach that is not of minor importance, within the meaning of Article 1453 of the Civil Code.

Termination by operation of law under Article 1457 of the Civil Code and termination for breach under Article 1453 of the Civil Code are legally distinct hypotheses, differing in both formal and substantive requirements. Conflating them exposes the judgment to the defect of ultra petita (ruling beyond what was requested).

Practical implications for practitioners

This body of case law gives rise to precise operational guidance.

For those representing the seller. Do not rely on the clause "no later than": if you want a genuinely essential term, draft the clause so as to state unequivocally that, once the term has expired, the benefit of the contract is to be regarded as definitively and permanently lost, and link it to objective elements of the transaction (tax deadlines, commitments to third parties, expiring financing arrangements). After the deadline has passed, do not remain inactive: send a formal notice to the counterparty, fix an appointment with the notary, and document every step taken. And if the counterparty brings proceedings seeking return of the deposit, file an express counterclaim seeking a finding of the right to withdraw and retain it.

For those representing the buyer. The phrase "essential term" in the preliminary agreement is not an insurmountable obstacle, particularly where the contract is silent as to the consequences of expiry and where the parties' conduct shows a continuing interest in the transaction. Document your own initiatives, challenge the counterparty's inaction, and if the seller has failed to bring the counterclaim, raise this as an objection: the deposit must be returned.

Conclusion

The judgment of the Court of Naples offers a lesson that goes well beyond the individual case. In real estate preliminary agreements, there are no automatic mechanisms. An essential term must be proven, not merely declared. A breach must be attributed, not presumed. And the deposit must be claimed, not simply retained.

A word of caution for practitioners: drafting the contract well is important, but managing its pathological phase is equally so. Silence, once the term has expired, is the worst enemy of anyone seeking to assert their rights.