International trading and the importance of customs and traditions: Vienna Convention and Civil Code compared.
It is often overlooked that a contractual relationship is not solely governed by the text that the parties have (possibly) agreed upon and that the transaction must be interpreted on the basis of the conduct of the contracting parties before and after conclusion, as well as that the same may be supplemented by any customs and habits practised in the commercial sphere where the contracting parties operate.
The subject of the integration of the contract is, of course, regulated by both the Vienna Convention (CISG) and the Civil Code, with differences that are certainly not negligible; the choice of whether or not to apply the Convention to a given relationship has rather significant practical repercussions that are briefly analysed below.
- Read also: When the Vienna Convention applies.
1. Vienna Convention
Article 9 of the Vienna Convention states that:
"The parties are bound by the usages [practices] to which they have agreed and by the customs [usages] established between them.
Unless the parties have agreed otherwise, they shall be deemed to have tacitly referred in the contract and in its drafting to any usage of which they were or ought to have been aware and which, in international trade, is widely known and regularly observed by the parties in contracts of the same kind, in the trade concerned. "
According to this provision, the parties to an international sales contract are bound by both customs ("practices"), as well as to practices ("usages"), which the contracting parties have (expressly or implicitly)[1] established between them. Although the convention does not define the concepts of usages e practicesthey can be translated as follows:
- "practices"with individual customs, i.e. commercial practice[2] established between the contracting parties in their previous contractual relations;[3]
- "usages", with negotiated usages, or customs, understood as conduct normally practised in a certain commercial sphere, with the belief that it is binding conduct.
According to Art. 9 para. 1 of the CISCG, both the "practices", that the "usages" do not have a mere interpretative value, but must even be considered an integral part of the contractual relationship, albeit subject to certain limitations and conditions, which will be analysed below. Before doing so, for the sake of clarity, some "practices" that were deemed applicable between the parties:
- the obligation of a seller to promptly deliver spare parts to the buyer, based on the practice that had been established between them;[4]
- it was held that a seller could not invoke the rule in Article 18 CISG that silence does not amount to acceptance, given that the parties had established an internal practice whereby the seller executed the buyer's orders without the need for express acceptance;[5]
- in another case, also for the purpose of reporting defects, it was decided that the purchaser was bound to a certain manner of examining the delivered goods on the basis of a practice that had been established over time.
But when are such practices?
First of all, it is necessary to understand whether a real ''relationship'' has actually been established between the parties.practice" and, in order to do so, it is necessary that the particles have been conducted with such frequency and over such a period of time as to cause the party invoking them to believe and presume in good faith that they would be perpetuated over time.[6]
Once this 'preliminary' element has been ascertained, it is indeed necessary to verify whether there are any contractual provisions between the parties that exclude their applicability, or whether there are contractual agreements that are in fact contrary to the practice allegedly established between the contracting parties.
In fact, although according to a jurisprudential orientation[7] usages and customs would even derogate from the provisions of the Convention, if the parties have excluded their application, or have inserted clauses that in fact conflict with them, negotiated agreements would prevail over usages. This principle follows from Article 6 of the CISG, according to which the will expressed by the contracting parties is the primary source of the rights and obligations arising from contracts concluded under the CISG.[8]
Thereafter, the onus will be on the party claiming its existence to prove the required elements,[9] with the consequence that in the event of failure to do so, custom and practice will not be binding between the parties.
Once its existence has been proven under the Convention, its legitimacy must be assessed according to the domestic law applicable in each case, so that the validity of usages does not fall within the scope of the Convention, which only regulates the criteria for their applicability.[10]
As for commercial uses (usages), which, on the other hand, are those customs that are normally practised in a certain mercantile environment, the parties are bound to them, pursuant to Art. 9(2), even in the absence of an express agreement transposing them, provided that they "were or should have been aware'..
As a general rule, international trade usages should only be considered binding if they are widely known to the parties, or if they are regularly observed in international trade.[11] It should also be noted that for a usage to be binding it does not have to be international, but local usages used e.g. in stock exchanges, trade fairs, warehouses, may also be applicable to the relationship, provided that they are also regularly applied in transactions involving foreign contracting parties.[12]
One decision was even held that the usages are automatically included in any agreement governed by the Convention unless expressly excluded by the parties.[13]
Also for the usages, the principle applies that they (if applicable) derogate from the provisions of the Convention that differ therefrom, but not from conflicting contractual agreements, contractual autonomy being the primary source of the rights and obligations of the parties.
As to the burden of proof, it is held that there is no difference in the allocation of the burden of proof under Art. 9(1) and (2), since the party claiming the existence of usages or practices binding, it must nevertheless prove the elements required by it.[14]
2. Civil Code
Certainly less linear and decidedly more complex is the civil law regulation of usages and customs, which are categorised into:[15]
- Regulatory usesgoverned by arts. 1 and 8 of the lexis. These are all the unwritten rules that a given social environment consistently observes over time as legally binding rules.[16] Such usages apply to matters not regulated by laws or regulations, or to the extent to which they are referred to therein.
- Contractual Uses, negotiations or usage clauses, as referred to in Art. 1340 of the Civil Code. To be understood as practices as commonly and consistently observed in contractual transactions in a given place or branch of trade. Such usages may be equated with "usages' referred to in the Vienna Convention.
- Individual uses, are the practice established in relations between certain parties and relevant to the interpretation of the contract, pursuant to Art. 1362(2) of the Civil Code (assimilated to the "practices"of the CISC).
While understanding in detail the distinction between regulatory uses and contracts would certainly require a more careful and thorough examination, but for the purposes of the present article, it may be simplified by stating that the statutory usages are those applicable whenever the law refers to them (e.g. in the matter of sale, Art. 1498, para. 2 of the Civil Code on the manner of payment of the price), or when there are matters not regulated by the law itself, in which case they play an integrative function (usages praeter legem).
The negotiated uses on the other hand, are generalised business practices that are intended to be included in the contract if it does not appear that they were not intended by the parties (Art. 1340 Civil Code).[17] Such usages may, for instance, provide for the variability of the quantity or quality of the goods within certain tolerance limits, or the obligation to return the containers of the goods bought and sold, or the possible acknowledgement of a performance guarantee; in the international sphere, the uniform rules and usages of the International Chamber of Commerce in the field of documentary credits have been regarded as negotiating usages.[18]
Moreover, unlike statutory usages, negotiated (or contractual) usages apply without the need for a statutory reference: the law contains, in fact, in Art. 1374 of the Civil Code (integration of the contract) a general reference to usages as a source of integration of the contract, since the parties are bound by what is determined by the agreement and by all the consequences arising therefrom according to the law or, failing that, according to usages.
A first and important difference is related to the fact that negotiated uses (as opposed to usages which are applicable whenever the same were known or knowable to the parties at the time of the conclusion of the contract) in civil law the jurisprudence is not in agreement as to whether they can be deemed to be incorporated into the contract only by virtue of an express or tacit manifestation of the parties,[19] or whether the uses oblige the parties even if ignored by them.[20] It may, however, be reasonably argued that such usages are also effective in derogation of (obviously non-mandatory) statutory provisions, but that they must be excluded in the event of a contrary, agreed will of the parties, even if tacitly expressed.[21]
Negotiated uses must also be distinguished from individual usesi.e. the practice established in relations between certain contracting parties (the practices of the CISG).
Very important to note that, contrary to the practices, the internal practice of the contracting parties is only relevant for the interpretation of the contract, as the overall conduct of the parties (Art. 1362 para. 2 CC),[22] but does not also incorporate its contents under Article 1340 and Article 1374 of the Civil Code.[23]
It follows, therefore, that unlike Art. 9 of the CISC, the bargaining practice established between the parties cannot have the value of an actual contractual clause forming an integral part of the relationship, but can only be used as an element to interpret the contract. Difference, far from negligible.
One way of nevertheless attempting to pursue the same result, i.e. to integrate a given individual practice within the relationship, would be to have recourse to the principle of equity, referred to in Article 1374 of the Civil Code, which provides as follows:
"The contract binds the parties not only to what is expressed therein, but also to all the consequences arising therefrom according to law, or, failing that, according to usage and equity the parties shall be bound by it. uses and theequity. "
Using this principle, coupled with the principle of performance in good faith of the contract under Art. 1375 of the Civil Code, one could possibly attempt to argue that the continued and repeated conduct of one party has engendered in the other the expectation that the same would be repeated.
Certainly, such a solution would still be much more complex and difficult to implement than if the Vienna Convention were to apply to the relationship, given that the provisions of Article 9 are certainly much clearer and easier to interpret in this respect.
[1] Oberster Gerichsthoff 21 March 2000.
[2] See DE FRANCHIS, Dizionario Giuridico Itailano-Inglese, Giuffrè Editore,
[3] BUSANI, The International Sale and Purchase Agreement, p. 97 et seq., 2015, Giappichelli
[4] Court of Arbitration of the International Chamber of Commerce, France, December 1997 No. 8817,
[5] Cour d'appel de Paris, France, 10 September 2003
[6] UNCITRAL: Digest of Case Law on the United Nations Convention on Contracts for the International Sale of Goods-2016 UNITED NATIONS 2016 Edition.
[7] CLOUT case no. 313, Cour d'appel de Grenoble, France, 21.10.1999.
[8] See Hof van Beroep Antwerpen (Belgium), 24 April 2006; BUSANI, op. cit.
[9] Oberster Gerichtshof, Austria, 21 March 2000.
[10] Oberster Gerichtshof, Austria, 22 October 2001.
[11] UNCITRAL: Digest of Case Law on the United Nations Convention on Contracts for the International Sale of Goods-2016 UNITED NATIONS 2016 Edition.
[12] Oberlandesgericht Graz, Austria, 9 November 1995.
[13] U.S. District Court, Southern District Court of New York, 10 May 2002.
[14] UNICITRA Digest. Op. cit.
[15] For the sake of simplicity, no further categories, such as interpretative uses and business uses, are included in this article.
[16] BIANCA, Civil Law, The Contract, 1987, Giuffrè.
[17] BIANCA, op. cit.
[18] Cass. Civ. 2009, no. 21833
[19] Cass. Civ. 2010 no. 8342.
[20] Cass. Civ. 2007 no. 5135.
[21] Cass. Civ. 2007 no. 5135; Cass. Civ. 1988 no. 76.
[22] CIAN - TRABUCCHI, Commentary on the Civil Code, Art. 1340, CEDAM.
[23] Cass. Civ. 1988 no. 3220.
The scientific informant: employee, agent or self-employed?
The sales representative is the person who acts as a highly qualified intermediary between the pharmaceutical company and those responsible for administering the drug (be it the doctor, the hospital or the pharmacy).
Although Italian jurisprudence has not entirely ruled out the applicability of agency rules to this figure, it has limited its application.
Below are some tools for understanding whether and when a sales representative should be classified as an employee, agent or self-employed person.
Sales promotion and intermediation in the pharmaceutical market is characterised by significant peculiarities. One of the main elements of atypicality of the sector is certainly to be found in the fact that the recipients of pharmaceutical products are the patients, whose relationship with the companies is, however, mediated by a third party (the doctor, the hospital or the pharmacy) to whom the legal system attributes, for a large number of drugs, the exclusive function of identifying the most appropriate therapy through prescription.
The activity of connecting the pharmaceutical cause with the person in charge of administering the drug is largely carried out by the pharmaceutical sales representative (also known as the pharmaceutical propagandist).
The pharmaceutical sales representative is regulated in our legal system by the Legislative Decree 219/2006 Art. 122This rule requires the person carrying out this activity to possess a university degree in the scientific disciplines that are strictly listed, as well as the obligation for each pharmaceutical company to notify the Agency by January of each year of the list of scientific representatives employed in the previous year.
Examination of this legislation does not reveal an obligation for pharmaceutical companies wishing to use a sales representative to classify that person as an employee, since they are free to adopt either a subordinate employment contract, an agency contract, or a self-employment contract, depending on the actual manner in which the relationship is carried out.[1]
Below are some hints and tools for understanding whether and when a sales representative should be considered an employee, agent or self-employed person.
1. Employee or agent?
Given the absolute openness of jurisprudence in holding that the scientific informant can be freely classified as an employee,[2] Should the parties choose to adopt such discipline, the applicability of the rules on agency to the relationship must certainly be excluded.
If, on the other hand, the relationship should be classified as an agency, in order to verify whether it has been correctly classified, it will be necessary to verify, in the concrete case, the actual content of the services rendered, taking into account the real attitude of the parties; in practice, ascertaining whether or not there is an effective subordination of the scientific informant to the hierarchical and disciplinary power of the entrepreneur, as well as an assumption of the risk of the activity.[3]
A rather dated cassation (Court of Cassation Civ. 1992 No. 9676), but not for this reason still not relevant today, maintained that the activity of scientific informant can take place both in the context of a self-employed employment relationship and in that of a subordinate employment relationship, pointing out how in the case of the 'agent' propagandist the relationship is characterised by aresult obligationand, in the second case, of means. Indeed, it is stated that
"depending on whether the performance of the activity is characterised - by the manner in which it is carried out - as a mere result or as provision of working energies with the insertion of the propagandist into the production organisation of the entrepreneur and subjection to the instructions given by the latter'.
In particular, it is stated by the Court that:
"from the aforementioned activity - which (carried out autonomously or subordinately) consists in persuading potential customers of the advisability of purchasing, informing them of the product and its characteristics, but without promoting (if only marginally) the conclusion of contracts - differs the activity of the agent, who, in the context of an obligation not of means, but of result, must also promote the conclusion of contracts, his remuneration being directly linked to these and commensurate with them. "
A further element that will have to be taken into account for a correct framing of the relationship certainly concerns the way in which the sales representative is remunerated. If this subject's remuneration is in no way parameterized to the sales that are made by the principal in his area, and that, therefore, the economic risk is passed on in full to this subject, it will certainly be much more complex to sustain his classification within the discipline of the agency, or in any case of a self-employed relationship.
- Read also: The agency contract and the employment relationship: distinguishing criteria and evaluation parameters.
2. Agent or self-employed?
Generally speaking, although Italian case law has not entirely ruled out the applicability of the agency rules to the pharmaceutical sales representative, it has limited its application.
The starting point of this interpretation process is the definition of 'agency' in Art. 1742 of the Civil Code, where among the characteristic services of the commercial agent is that of promoting contracts. It reads:
"With the agency contract one party permanently assumes the task of promoteon behalf of the other, towards remuneration, the conclusion of contracts in a given area. "
If, on the other hand, one analyses the activities of various scientific informants, one can see that they (and hence also the name) mainly carry out not so much the activity of promotion, but that of (different) propaganda.
To distinguish the two activities, it can be simplified by pointing out that thepropaganda activities consists essentially in illustrating, albeit also in a very analytical, detailed and scientific manner, the qualities of a given product (in this case a drug), while extolling its qualities and characteristics that distinguish it from its competitors.
On the other hand, thepromotional activitiesand consists, instead, of a series of activities aimed at stimulating demand for a product, such as, for example, launching promotional campaigns, developing marketing strategies, etc.
Therefore, on the assumption of the significant difference between these types of activities, some case law has held that the mere propaganda carried out by a scientific informant, by means of visits to doctors or medical managers,
"in order to promote the adoption of the drugs they represent should be considered as an atypical relationship, non the scheme of an agency relationshipin view of the fact that the propagandist, in addition to not entering into any contracts with clients of the publishing house, does not even carry out any activities aimed at concluding contracts, this event being external to the advertising activity and, moreover, eventual. "[4]
In particular, the Court of Cassation held that the activity of promoting the conclusion of contracts on behalf of the principal, which constitutes the agent's typical obligation, cannot consist in a mere propaganda activity, from which an increase in sales may only indirectly derive, but must consist in convincing the potential customer to place orders for the principal's products, since it is precisely with regard to this result that the agent is awarded the remuneration, consisting in the commission on contracts concluded through him and successfully concluded.
There is a further problem, or perhaps it is better to say that this problem is exacerbated and becomes even more glaring when the pharmaceutical sales representative works for hospitals or public health agencies. In that case, part of the case law even considers that the existence of a promotional activity should be ruled out a priori, since the intermediary who comes into contact with public bodies cannot in any way convince the P.A.. to order the product, in view of the constraint of administrative procedures of public evidence for the conclusion of contracts. "[5]
In other pronouncements, especially in so far as the scientific informant simultaneously performs the typical tasks of the agent, it has been held that the activity of advertising, although it cannot in itself constitute the typical activity of the agent, does integrate the prerequisite of promoting the conclusion of contracts.
It is considered appropriate to quote below an excerpt from a pronouncement of the Court, in which it is noted that, although the agent's services consist of acts of varied and non-predetermined content that all tend to promote the conclusion of contracts, the typical activity of the commercial agent does not require:
necessarily the search for the customer and is always attributable to the service under the agency agreement even when the customer, from whom the contract proposal submitted by the agent originates, was not directly sought by the agent but was acquired on the principal's instructions (or in any other way), provided that there is a causal link between the agent's promotional activity vis-à-vis the customer and the conclusion of the transaction to which the claim for commission relates.
In any event, for an agency contract to exist it is not necessary for the agent to be able to fix prices and discounts and in any case to modulate the conditions of the service to the particular needs of the clients of the service itself, since the standardisation of the sales conditions can make the action of advertising preeminent over that of preparing and setting up the contract. "[6]
It can therefore be concluded that the propaganda is a component of the promotion, considered by Art. 1742 of the Civil Code, and that it is sufficient to supplement it when it resumes, combined with other tasks typical of the agent, the function of organising and developing the placement of the product, so as to attribute to the agent the role of effective intermediary between the company and its customers, also by means of a mediated solicitation of the possible purchasers of the good or service.
In other words, the existence of an agency contract cannot be excluded a priori merely because the promotion of contracts is addressed to different persons to final customers (i.e. those persons who make the purchase of the good or service), it being necessary in the present case to ascertain whether the person performs an actual sales promotion activity, even if of an indirect nature.
____________________________________________
[1] On this point see Venezia, Il contratto di agenzia, p. 667, 2020, Giuffrè.
[2] Cass. Civ. 2006 no. 4271, Cass. Civ. 2001 no. 9167.
[3] Cass. Civ. 2009 no. 9696, "The distinctive element between the agency relationship and the subordinate employment relationship is to be found in the circumstance that the former has as its object the performance in favour of the principal of an economic activity exercised in an entrepreneurial form, with organisation of means and assumption of risk by the agent, which is manifested in the autonomy in the choice of the times and modes of the same, albeit in compliance - according to the provisions of Art.Article 1746 c.c. - of the instructions received from the principal, whereas the subject-matter of the second is the performance, under a regime of subordination, of working energies, the result of which falls exclusively within the legal sphere of the entrepreneur, who bears the risk of the activity carried out." Cass. Civ. 2008 no. 21380.
[4] Cass. Civ. 2006 no. 3709.
[5] Cass. Civ. 2008 no. 18686.
[6] Cass. Civ. 2018, no. 20453.
Selective online distribution: the Amazon.it case.
1. Selective distribution: the regulatory and jurisprudential context.
Based on the assumption that the goal of every manufacturer is to maximise its profit, there are cases in which this goal can only be achieved by restricting access to the official sales network to distributors and resellers with special requirements, so as to protect the image of excellence and product quality.
This tends to be the case for technically complex products - for which customer service is particularly important - and the manufacturer believes that the certainty of an adequate service can positively influence the purchaser's choices, or in the case of beauty or fashion products, where the protection of the product's image or prestige may be considered essential in order not to dissuade the consumer from purchasing a product that is offered together with goods of much lesser value.[1]
Here is the manufacturer's interest in creating a selective distribution within which, each authorised member undertakes to sell the contractual goods or services only to distributors selected on the basis of predetermined criteria, in order to safeguard, in the consumer's perception, the aura of exclusivity and prestige of the products, thanks precisely to a presentation of the goods to the public that enhances their aesthetic and functional specificity.
Although selective distribution is abstractly capable of restricting competition on the market (thus contrary to theArticle 101(1) TFEU), it is nevertheless regarded as a legitimate selling method (pursuant to Article 101(3) TFEU) provided that:
- the characteristics of the products actually require a selective distribution system, in view of their high level of quality and technologyin order to preserve their quality and ensure their proper use;
- the choice of dealers is made according to objective criteria of a qualitative nature, established indiscriminately for all potential resellers and applied in a manner non-discriminatory;
- the system proposes a result apt to improve competition and thus counterbalance the restrictions on competition to the same;
- the criteria imposed do not go beyond what is necessary.[2]
Under these conditions, therefore, a selective distribution system is permissible.
The first and main advantage (linked in fact to the very essence of selective distribution itself) is the fact that in such a system, the manufacturer may oblige those belonging to the network and, therefore, bound to it by a contractual relationship, not to promote sales to parties (other than end users) not belonging to the network (Art. 4(b)(iii)), subject however to the possibility of sales cross between authorised members (Art. 4(d)).[3] Therefore, in the event of a breach of contractual obligations, the manufacturer will have the possibility of retaliating against the non-performing member by resorting to the remedies typical of breach of contract.
- Read also: Selective distribution. A brief overview: advantages and disadvantages.
On the other hand, as far as relations with parties outside the network are concerned, with whom the producer by definition has no contractual relationship, it can now be affirmed without hesitation that the producer has the right to seek injunctive relief against the parallel distributorsif, and only if, the manner of resale is such as to damage the image of luxury and prestige - which the manufacturer seeks to defend precisely by adopting a selective distribution system - or if there is a confusing effect as to the existence of a commercial link between the proprietor of the trade mark and the unauthorised reseller.
As is well known, thearticle 5 c.p.i. - which in its first paragraph lays down the so-called principle of exhaustion, in its second paragraph provides for an exception, stating that the holder of an industrial property right may, if there are legitimate reasons, oppose the further commercialisation of its products already on the market, in particular if their condition is changed or altered; it is now common ground that selective distribution falls within this exception.[4]
- Read also: Parallel Sales in the EU. When and to what extent can a manufacturer control them?
The application of these principles to sales onlineThis has led to the consolidation of a guideline that considers unlawful, as constituting a serious restriction of competition, a contract that absolutely prevents the sale via web[5] and that a restriction on the distribution online would only be lawful if it aimed to make authorised dealers of a selective system comply with certain quality standards with the main purpose of safeguarding the image of the contractual products.
- Read also: Can a manufacturer prevent its distributors from selling online?
Given that online sales have been de facto 'cleared' by European jurisprudence, albeit with the limitations mentioned above, a further issue has arisen, namely whether parallel distributors can also claim the right to make sales via web. A recent judgment of the Court of Milan - applying the principles already well established in the field of 'traditional' sales - held that in relations extra-contractualthe proprietor of exclusive property rights, may only block sales to persons outside the selective sales network if there is actual prejudice to the luxury or prestige image of the trade mark, thus affirming that the failure to distinguish by a maerketplace (in this case amazon.co.uk) between luxury and inferior products can confuse the consumer and damage the prestige of the brand.[6]
2. The case Shiseido v. Amazon.
With order of 19 October 2020 (currently the subject of a complaint), the Court of Milan again confirmed its orientation, upholding the appeal brought by the licensees of trademarks including "Narciso Rodriguez" e "Dolce & Gabbana" for the manufacture and marketing of perfumery and cosmetics products, preventing 'amazon.it' from promoting and offering for sale products bearing its trademarks, which are the subject of selective distribution agreements.
The Court of Milan, in order to verify the existence of the fumus boni iurisIt established the existence of the following three requirements:
- if the products in question could qualify as luxurious;
- if the selective distributionof the applicant was legitimate;
- if the off-network sale would bring an effective damage to the reputation of the trade mark.
2.1. Ascertaining the luxury category of products.
The examination of this requirement was carried out, in this case, on the basis of quality indexes, finding, with reference to the trade marks 'D&D' and 'Narciso Rodriquez':
"the search for high quality materials, the care for packaging [...], the public presentation promoted at publicity level by personalities from the entertainment industry, the wide accreditation in the sector of reference deducible from [...] awards obtained, the consolidated recognition by the specialised press".
The Court, on the one hand, held that such serious, precise and concordant evidence, pursuant to Article 2729 of the Civil Code, proved that such fragrances belonged to the high-end category (reserving the right to conduct a more detailed investigation at the merits stage) and, on the other hand, again using the same indices and parameters of assessment, declared that the aura of luxury had not been sufficiently proven with reference to the marks "Iseey Miyake", "Elie Sahh" e "Zadig&Voltaire', thus placing these fragrances in the high-end category.
2.2. Verification of selective distribution contracts.
After verifying the aura of prestige of the products in question, it was necessary to verify the actual existence of selective distribution.
According to European case law, in order to benefit from the exemptions of Article 101(3) of the Treaty, it is not sufficient that a manufacturer has made a significant promotional effort in favour of high-end products, but also the conclusion of agreements that effectively impose on other independent economic operators obligations restricting their freedom of competition, since, otherwise, each manufacturer could justify the use of a selective distribution system only on the basis of the promotional activities carried out, so that any restrictive infringement criterion would be justified by the fact that it was necessary to protect the marketing strategy desired by the manufacturer.[7]
Moreover, once the existence of a selective distribution system has been verified, according to a recent orientation of the Court of Appeal of Milan, the producer may only claim the advantages deriving from it, and thus derogate from the principle of exhaustion, if, in application, the existence of an effective vigilance exercised on the market by the manufacturer.[8]
In the present case, the Court analysed the clauses of the contracts and verified that the obligations imposed on authorised dealers appeared to be aimed solely at protecting the luxury aura of the trade marks, having been applied "objective, qualitative, non-discriminatory criteria proportionate to the luxury character of the products distributed" and therefore "confirms the regulatory and jurisprudential principles cited'.
In particular, limitations on brand and sign positioning, sales and advisory service, sales methods, use of advertising material, qualification of sales personnel and customer care were deemed appropriate.
The contracts provided for further restrictions on how sales could be made via internet, as only authorised dealers are allowed to carry out such activities. availability of at least three physical points of sale and only after specific authorisation by the licensee, who, once the admission procedure had been activated, still had to set up and operate the site in accordance with the contractually imposed standards (graphical quality of the site, quality space dedicated to competing luxury products of the same level, absence of products other than perfumery or beauty products).
The General Court held that the limitations imposed by Shiseido on its authorised retailers, including making the use of e-commerce conditional on the availability of at least three physical points of sale, did not appear to go beyond what was necessary, in view of the fact that (with reference to the requirement of physical points of sale) the same is admitted by the European Commission itself in paragraph 54 of the Guidelines of the Exemption Regulation.
2.3. Brand reputation bias.
The last element to be ascertained by the Court, which is necessary for the application for an injunction to be granted, is the existence of a concrete injury to the holder of the patent rights, since it is not sufficient to merely note the circumstance that the unauthorised seller does not comply with the standard imposed on authorised dealers.
Indeed, case law requires that the specific manner of sale must concretely damage the prestige of the trade marks in order for the proprietor to prevent the unauthorised reseller from further resale.[9]
For the purposes of the injury determination, Amazon was challenged:
- the absence of physical shops (relevant for the products in question, i.e. fragrances and cosmetics, also for possible allergy testing of products),
- the lack of a customer service concept similar to that provided in the real shop with the presentation of a capable person,
- the combination of the perfumes in question with other heterogeneous, non-luxury products (toilet paper, insecticides),
- the presence of advertising material of products of other brands, even of lower market segments, on the same Internet page where the perfumes in question are present.
Of particular interest is the fact that the General Court thus held that it was not so much the fact that other, even non-luxury products were sold within amazon that was decisive, but rather that in the same virtual space (web page), heterogeneous goods were presented, thus applying a well-established orientation of European case law to the 'virtual'.
In particular, the European Court of Justice had confirmed the possibility for entities outside the network to sell contractual products in multi-brand shops (in this case a hypermarket), provided that the sign of the retailer does not devalue its luxury image and the sale is made in a reserved department or space in order to enhance the qualities of the products.[10]
Applying this principle to the virtual means, in practice, having to ascertain not only that the good is sold in a 'proper' manner, reserving a virtual space appropriate to its allure luxury, but also that it is promoted and sold on a marketplace or e-commerce whose signage does not devalue its image.
3. Amazon is an 'active' hosting provider
An element of absolute importance is the fact that the Court in this order established the nature of Amazon as an 'information society service provider' within the meaning of the Directive No. 2000/31/EC (on this point see also the legal nature of online platforms: the Uber and Airbnb cases) and, in particular, recognising that subject's role as an 'active' hosting provider in relation to the activity of managing its own sales portal, even where the same is limited to the provision of intermediation services, i.e. it does not carry out active sales activities within the site, but as a provider of services to third parties using the platform to promote sales.[11]
The Court, in particular, established Amazon's role as an 'active' hosting provider,[12] and as such not subject to the liability exemptions outlined by Articles 14, 15 and 16 of Directive 2000/31/EC, in view of the fact that the platform (i) '(i)manages the storage and shipment of products", (ii) "operates a customer service for third-party sales listings, which is the only service the customer has to interface with the seller", (iii) "is also responsible for promotional activity through advertisements on third-party websites" and (iv) "allows consumers to infer the existence of a link between Amazon"and the companies producing the products sold on the platform.
Read also - The hosting contract and the hosting provider's liability profiles.
4. Some reflections
The judgement that is the subject of this brief commentary now aligns with a well-established jurisprudential orientation that, in fact, reflects the reality of commerce today, namely a steadily increasing thinning between in-store shopping experience and online.
One can understand how the online distribution of luxury and high-end products will be less and less able to disregard the careful and rigorous care of sales methods and adhere more and more to strict standards that in physical shops are now taken for granted, not only from a legal point of view, but (above all) from a cultural point of view.
Indeed, it would not even be conceivable that a designer shop could sell a high-fashion dress together with a packet of toilet paper, which still regularly happens online, without causing such a stir for the consumer, who is perhaps more focused on the price and not on the online shopping experience.
This element will increasingly have to be taken into account by manufacturers in their sales strategies
Such a ruling, read a few years from now, will probably raise eyebrows, as a user cannot even imagine that within the same (virtual) shop a high-end perfume could be sold in the same manner and on the same page, together with liquid plumber.
[1] On the subject, Pappalardo, The Competition Law of the European Union, p. 405 ff, 2018, UTET.
[2] On this point see ECJ, 12 December 1996, Galec v. EC Commission, para. 16, ECJ, 13 October 2011, Pierre Fabre Dermo-Cosmetique, para. 41, EU Guidelines Reg. 330/2010, para. 175.
[3] In this regard, reference is made to what the Court of Justice stated in the case Metro-Saba IJudgment of 25.10.1977, at para. 27 ".Any sales system based on the selection of distribution points inevitably implies - otherwise it would make no sense - the obligation for wholesalers who are part of the network to supply only authorised retailers.
[4] Orders of 19 November 2018 and 18 December 2018 of the Court of Milan. with comment by Alice Fratti
[5] Court of Justice case, Pierre Fabre C-439/09.
[6] Court of Milan, 3 July 2019, with comment by RIVA, E-commerce and selective distribution agreements: the case 'Sisley v. Amazon', in Industrial Law, 1/2010, WoltersKluver.
[7] ECJ, 12 December 1996, Groupement d'achat Eduard Leclerc v. Cmmission, para. 111; see also Vichy v. Commission, judgment.
[8] Court of Appeal Milan, 25 November 2019, no. 5682.
[9] Court of Justice, 4 November 1997, Dior v. Evora.
[10] ECJ, 12 December 1996, Groupement d'achat Eduard Leclerc v. Cmmission.
[11] On this point, see also Traina Chiarini, Amazon is an 'active' hosting provider, according to the Business Court of Milan.
[12] To be contrasted with the passive hosting provider who, according to recital 42 of Directive 31/2000/EC, is to be qualified as such any service provider who does not exercise 'authority or control' and has a merely 'technical, automatic and passive role' and who 'neither knows nor controls the information transmitted or stored'.
Agency agreement and waiver in peius of the AEC.
Although the commercial agent falls within the category of self-employed workers, the majority jurisprudence does not consider it necessary to exclude the applicability to that relationship of the rules set forth in Article 2077 of the Civil Code, which establishes the non-derogation in pejus of collective agreements by the parties.
Therefore, in the event of the application of the AEC to the contract, any conflict between the collective discipline and that resulting from the individual contract, the individual discipline will prevail only if it is more unfavourable to the agent.
There are, however, differing legal and doctrinal orientations, which favour the validity of an individual agreement that is worse than the common law collective discipline.
In the Italian legal system, the figure of the agent operating as a natural person, for both historical and cultural reasons, is very peculiar, such as to have led doctrine and jurisprudence to frame it in the tertium genus of worker "parasubordinate".
On this point, it suffices to recall that institutes typical of salaried employment are applied to this figure, such as the notion of just cause under Article 2119 of the Civil Code, the discipline of waivers and settlements under Article 2113 of the Civil Code, as well as the devolution of disputes to the labour court expressly provided for by Article 409 of the Code of Civil Procedure.
To make matters even more 'hybrid', there is certainly the application of collective economic agreements to the agency contract, which occurs whenever:
- both parties (i.e. both the agent and the principal) are members of the contracting trade unions;
- there is an express reference to AEC in the agency agreement;
- there is a tacit reference, i.e. whether the continuous and constant application of the AEC rules by the contractors can be inferred.[1]
The question therefore arises as to whether, since collective agreements can be assimilated to collective labour agreements, it is correct or not to extend to the former the discipline of the latter, with particular reference to the rule in Article 2077, paragraph 2 of the Civil Code, which provides that:
"Differing clauses in individual contracts, whether pre-existing or subsequent to the collective agreement, shall be superseded by those of the collective agreement as of right, unless they contain special conditions that are more favourable to employees."
This rule prohibiting derogation in peius is designed and is compatible with the privatist principles of collective bargaining, which are aimed at subjecting the subjects represented by the stipulating associations to a common discipline and at removing the regulation of certain relationships from the excessive influence of employers.
In any event, while there is an effective applicability of certain labour law institutions to the discipline of the agent, the figure of the agent (especially as conceived by the European Directive 86/653) must certainly be included in the category of the self-employed, since he assumes the risk of the useful result of his activity, in contrast to the employee who transfers this risk, through the security of his salary, to his employer.
In essence, the collaboration performed by the agent is carried out under a regime of full autonomy, whereas that performed by the employee is carried out under a regime of hierarchical subordination, with the employer organising the employee's energies.[2]
On the basis of this assumption, i.e. the character of the staff member endowed with organisational autonomy and not subject to binding disciplinary authority, the - albeit long-standing - case law of the Court has held that the partial subjection of the staff member to the rules dictated for employment relationships
"does not entail any equivalence between the two contracts with the consequence that the principle of the nullity of modifications in pejus of contractual agreements valid for the employment contract is not applicable to the agency contract. "[3]
The Court held that it was compatible with the contractual autonomy of the parties and, therefore, not subject to the rules of Article 2077 of the Civil Code for an individual agreement to be worse than the collective rules applicable to the individual agency relationship, precisely because of the non-subordinate nature of that contract.
More recently, it has been held in case law that collective rules on agency agreements are binding on the assumption of implicit or explicit adherence,[4] the thesis that excludes: "the non-derogability of the AEC and the applicability of Art. 2077 of the Civil Code to the agency relationship as an external source. [5]
This thesis is once again based on the assumption that the assimilation of the agency relationship to the employment relationship is to be understood as limited only to certain specific institutions, such as the notion of just cause pursuant to Article 2119 of the Civil Code, while the difference in nature and discipline between the two relationships remains firm and clear.
It has also been rightly noted in doctrine that the non-derogation of common law AECs raises many doubts since it is not reflected in any provision of law. The only provision that deals with the non-derogation of collective agreements is in fact Article 2113 of the Civil Code on waivers and settlements which, although it also applies to 'para-subordinate' agents, does not provide for the nullity of any clauses of the individual contract contrary to the CSA, but only the possibility of challenging within a period of six months the waiver or settlement having as its object the collective rule.[6]
There is, however, a prevailing orientation of jurisprudence that deems, without going into too much detail on the regions, a contractual clause that differs from and worsens the regulation of AECs to be null and void, making specific reference to the regulation of Article 2077 of the Civil Code.[7]
[1] Cass. Civ. 1993 No. 1359, In this case, the Supreme Court held that the AEC was applicable to the agency contract, even though the principal was not a member of the trade union association and there was no express reference in the contract: instead, it recognised the existence of a consolidated company practice over time of the principal's compliance with the collective legislation.
[2] BALDI - VENEZIA, The Agency Contract, p. 33, 2020, Giuffrè.
[3] Cass. civ., 03/11/1980, no. 5860.
[4] Cass. Civ. 1999 no. 368.
[5] Court of Appeal Venice, 25.1.2011.
[6] TOFFOLETTO - SARACINI.
[7] Tribunale Torino 25.5.2021, Cass. Civ. 2004, no. 10774, Cass. Civ. 2000, no. 8133.
Termination of the sales concession contract and inventory management: rights and obligations of the parties.
Sales dealership agreements often contain an agreement on how to deal with the stock of goods purchased by the dealer during the term of the agreement; this regulation may take the form of an option for the franchisor to repurchase the goods at a certain price, or the former dealer may distribute these goods.
Other times, the parties do not provide for any contractual provision governing this case, and upon termination of the relationship, the problem arises as to whether or not the former dealer may resell the stock in inventory, or require the supplier to repurchase the goods.
In the following, these cases will be analysed, albeit briefly, in view of their relevance from both a technical and legal as well as a practical and commercial point of view.
1. Absence of a written agreement in the concession contract.
1.1. Right to resell products in stock.
In the absence of different contractual agreements, the case under analysis must be treated from two different aspects: under the principles of civil law, on the one hand, and those of intellectual property law, on the other.
Civilly the grantor may not prevent his dealer from reselling the goods purchased by the latter, unless the same have been sold subject to reservation of title and the dealer disposes of the contractual goods before becoming the owner: in this case, in addition to the breach of contract, the disposal will even constitute the offence of embezzlement (Art. 646 of the Criminal Code).[1]
From the point of view of intellectual property lawInstead, it is necessary to take up a principle that has already been addressed several times in this blogthat of thebrand exhaustionreferred to inart. 5 c.p.i.
Read also - Parallel sales and the principle of trade mark exhaustion.
According to this principle, once the owner of one or more industrial property rights places a good directly or with his consent on the market in the territory of the European Union, he loses the relevant rights.
The exclusivity is therefore limited to the first act of marketingwhereas no exclusivity can subsequently be claimed by the proprietor of the trade mark on the circulation of the product bearing the mark.
Since in a sales dealership agreement, the consent to the first placing on the market (i.e. the sale by the grantor to the dealer) stems from the contractual relationship between the parties, in the absence of any agreement to the contrary, the grantor may not oppose the resale of the contractual goods even once the relationship has ended.
It is stated in case law on the subject that:
"the entrepreneur, who has purchased goods with distinctive signs, is indeed entitled to market the product even after termination of the relationship because, according to the principle of exhaustion, the holder of an industrial property right cannot oppose the circulation of a product, to which that right relates, when that product has been placed on the market by the holder of that right or with his consent in the territory of the state or in the territory of other Member States of the European Union."[2]
The principle of exhaustion nevertheless knows a limitation: the second paragraph of Art. 5 of the IPC contains a safeguard rule that allows the trade mark proprietor to oppose the circulation of the product placed on the market with his consent and, therefore, "exhausted", if there are
"legitimate reasons for the proprietor to object to the further marketing of the products, in particular when their condition is changed or altered after they have been placed on the market".
Therefore, in the absence of 'legitimate reasons'[3]the supplier may not prevent the dealer from reselling inventories, let alone from using its trade mark, if it is used by the dealer for the sole purpose of advertising the availability of the product it intends to sell or lease and the advertising activity is not such as to create in the public the belief that the dealer is part of the licensor's authorised network, otherwise such conduct would constitute a confusing offence under Article 2598(1)(1) of the Civil Code on the subject of unfair competition.[4]
1.2. Right to have inventories repurchased.
In the absence of a contractual obligation, in order to understand whether the dealer may require the grantor to repurchase the goods remaining in stock, one must refer primarily to the principles of loyalty and good faith formerly Article 1375 of the Civil Code.
The clause of good faith in the performance of the contract operates as a criterion of reciprocity, requiring each party to the obligatory relationship to act in such a way as to preserve the interests of the other, and constitutes an autonomous legal duty incumbent on the parties to the contract, irrespective of the existence of specific contractual obligations or of what is expressly laid down by law.[5]
Since this is a very broad principle and certainly not easy to implement in practice, it is necessary to assess from time to time how it should be applied to the concrete case, on the basis of all those factors that may impact on the contractual balance: it will certainly be assessed differently if the concessionaire had been contractually obliged to maintain a stock in stock, as opposed to the case where the stocks are due to a failure to adhere to the rules of prudence, which should have advised the dealer to suspend or otherwise reduce purchases and dispose of medium warmth inventories in view of an upcoming report.[6]
A ruling by the Court of Milan is recorded,[7] which considered contrary to these principles the conduct of a supplier who prevented (contrary to the principle of exhaustion) the plaintiff from marketing the product it had supplied prior to withdrawal, without having cooperated in safeguarding the interest of the other party by making available - although not contractually provided for - the repurchase of the goods.
The Court therefore ordered the defendant to pay damages, quantified in the value of the goods remaining in stock.
There is also a further ruling, again by the Court of Milan,[8] relating to a licensing relationship, in which the court reached such a result with the aid of the instrument provided by Article 1340 of the Civil Code, according to which contractual usages or usage clauses are deemed to be included in the contract if it is not apparent that they were not intended by the parties.
The Court therefore held that the licensor was obliged to repurchase the goods sold, in addition to cooperation and conduct in good faith, on the basis of the fact that in the industry in which the parties operated it was customary for the licensor to purchase at least part of the unsold goods following the termination of the relationship.
2. Existence of an agreement between the grantor and the concessionaire.
2.1. Prohibition to resell stock.
A contractual clause that imposes a prohibition on the dealer to sell goods in stock following termination of the contractual relationship, without there being a commitment on the part of the grantor to repurchase such goods, is, in the opinion of the writer, of doubtful validity, both from a antitrustand civil law, for the reasons set out below.
In the field of antitrustArticle 5(b) of the Regulation 330/2010imposes limitations on the supplier's ability to require its buyer to engage in competitive activities after termination of the relationship. "The parties may not impose any direct or indirect obligation on the buyer, after the agreement has expired, not to manufacture, purchase, sell or resell certain goods or services, unless such obligation [...].:
- refers to goods or services in competition with the contract goods or services;
- is limited to the premises and land from which the purchaser has operated during the contractual period;
- is indispensable to protect the 'know-how' transferred from supplier to purchaser;
- the duration of this obligation is limited to one year. "
Since the requirements for the legitimacy of this obligation are cumulative, the rule does not normally apply to typical forms of sales concessions, which do not imply the need to protect know-how provided to retailers, but rather to the franchising,[9] with the consequence that this exemption can hardly be applied to the contractual case under analysis.
Moreover, the non-compete obligation is not part of the 'severe restrictions' (hardcore) governed by Article 4 of the Regulationbut of those that are simply not exempt, with the consequence that these limitations are only applied to contracts that have no less importancei.e. which do not appreciably restrict competition: this is the case whenever the market share held by each of the parties to the agreement exceeds 15% on the relevant markets affected by the agreement.[10]
If the dealership contract qualifies as a contract of minor importance, an agreement imposing a prohibition on the resale of the stored goods would benefit from the exemption and would (at least from a antitrust) lawful.
Mind you, this does not alter the fact that such a contractual agreement must in any case be subjected to the scrutiny of the principles of good faith and contractual fairness, so that it may be invalid if it is not adequately counterbalanced by - for example - an obligation on the part of the grantor to repurchase the goods in stock, in particular if the latter was contractually obliged to maintain a stock minimum in stock in the course of the report.[11]
2.2. The grantor's right to repurchase the goods.
A different reasoning must be made - again for the purpose of assessing its legality - in the case where the parties provide for a right of the grantor to repurchase the stock of the products, following the termination of the relationship.
To do so, it is first necessary to understand the legal nature of such an agreement, i.e. whether it should be framed as:
- preliminary contract formerly 1351 of the Civil Code, ancillary to the concession contract, i.e.
- purchase option agreement, formerly 1331 c.c.
The differences between these institutions are briefly examined below.
(a) Preliminary contract.
This is the case whenever in the contract both parties agree that upon termination of the relationship the products to stock will be bought back by the supplier at an agreed price.
Ex. The parties agree that at the end of the contract the dealer shall be obliged to resell to the licensor the entire remaining stock of products at a price equal to the invoice price net of VAT, with a discount of _____.
Such a contractual clause (which would indeed constitute a preliminary contract) is certainly valid, unless it is proved that the contract was null and void ab originee.g. for lack of consent of one of the parties, abuse of rights, etc.
(b) Call option covenant.
If, on the other hand, in the contract one party undertakes to hold firm to its own proposal and the other party (the beneficiary) is granted the right to make use of the option to accept the proposal or not, we fall into the different case of the option contract formerly Article 1331 of the Civil Code.
Ex. At the end of the contract, the grantor has the option to repurchase the stock at the price _______, to be notified within _____ of the termination of the contract.
Such an agreement must also tend to be considered valid; the only problem might be connected with the case where the option right is granted free of charge, i.e. without payment of a price (so-called premium).
Some (albeit minority) case law[12] holds that in such a case the option agreement would be null and void, since the right cannot be granted free of charge (e.g. a discount on the repurchase of goods). It should be noted, however, that the majority jurisprudence is in favour of the option being gratuitous: "Article 1331 of the Civil Code does not provide for the payment of any consideration and, therefore, the option may be offered for consideration or free of charge".[13]
[1] Torrente - Schlesinger, Handbook of Private Law, Giuffrè, § 377.
[2] Trib. Milan, 6.5.2015; in case law Court of Justice, 8.7.2010, Portakabin case.
[3] The following constitute 'legitimate reasons' for the non-application of the principle of trade mark exhaustion: (a) the modification or alteration of the condition of the goods, after they have been put on the market and (b) all those cases implying a serious and grave prejudice: the latter must be ascertained in concreto. On this point cf. Trib. Milan 17.3.2016.
[4] On this point Civil cassation 1998, no. 10416; Trib. Rome, 28.4.2004.
[5] Cass. Civ. 2014, no. 1179.
[6] On this point cf. Trib. Milan, 19.9.2014.
[9] Bortolotti, Distribution Contracts, Walters Kluver, 2016.
[10] Cf. De Minimis Communication 2014 of the EU Commissionin conjunction with the Commission Notice on Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty.
[11] On this point cf. Trib. Milan, 19.9.2014.
[12] See Appeal Milan 5.2.1997.
[13] Trib. Milan 3.10.2013
General conditions of contract in national and international online sales. What if the Vienna Convention applies?
The regulation of general terms and conditions in e-commerce involves not a few insignificant complexities.
If on the one hand it seems easy enough from a practical point of view to ensure that the general terms and conditions of sale are knowable by means of certain expedients, it is certainly more complex and less easy to ensure that vexatious clauses are expressly approved in writing in accordance with the dictates of the second paragraph of Art. 1341 of the Civil Code.
The notion of general terms and conditions of contract ("GTC") is included in our legal system in Art. 1341 of the Civil Code. General Terms and Conditions of Contract are to be understood as a set of contractual clauses, which are by their nature generalitiesas they are intended to apply to all contracts of a given series, and of one-sidednessas they are only prepared by a contractor, the so-called predisponent.
The formula general terms and conditions thus expresses the practical phenomenon of the prior and unilateral formulation of a uniform negotiating content intended to be used to regulate an indefinite series of relationships belonging to the predisposer.[1]
1) When are they valid?
Art. 1341 of the Civil Code lays down, in relation to the content of general terms and conditions, two different requirements of effectiveness. It provides, in para. (1), for the general requirement of effectiveness of knowledge or cognizability and, in para. (2), for the particular requirement of effectiveness of specific approval in writing in the case of so-called vexatious or so-called onerous clauses.
1.1. Knowability and knowledge.
Knowability consists in the possibility for the adherent to acquire knowledge through the use of ordinary diligence. Therefore, for all contracts that are concluded by means of uniform contractual terms and conditions prepared by the contracting party, the favourable principle dictated by the first paragraph of Art. 1341 of the Civil Code applies, according to which the actual content of such clauses is enforceable against the other contracting party even if the latter, without having knowledge of them, should nevertheless have known them by using ordinary diligence.[2]
This, however, presupposes an activity on the part of the predisposing party that is appropriate to permit knowledge, taking into account the diligence that is normal to expect of the average adherent with reference to the type of economic transaction performed.[3]
1.2. Written proof and unfair terms.
Para. (2) regulates the specific situation in which the terms themselves are vexatious and provides that they, in order to be binding on the other contracting party, must be approved particularly in writing, in the knowledge that an objectively onerous obligation is being undertaken.[4] The list of unfair terms (which is exhaustive and not subject to extensive interpretation)[5] is specifically concerned with:
- limitations of liability (Art. 1229);
- power to withdraw from the contract (Art. 1373) or to suspend its performance (Art. 1461), or impose forfeitures on the other contracting party (Art. 2965);
- limitations on the right to raise objections (Art. 1462);
- Restrictions on freedom of contract in relations with third parties (arts. 1379, 1566, 2596), tacit extension or renewal of the contract (arts. 1597, 1899), arbitration clauses (art. 808 of the Code of Civil Procedure) or exceptions to the jurisdiction of the courts (arts. 1370; 6, 28, 29, 30, 413 of the Code of Civil Procedure).
Since one of the characteristics of the GTC is their unilateral nature, the need for written approval of unfair terms is excluded whenever the conclusion of the contract was preceded by a negotiation which specifically addressed the terms that would otherwise require an independent signature, whereas the signature remains indispensable for terms with vexatious content to which the party has adhered without any discussion.[6]
As to the manner of approval, it is generally held that there is no need for a specific signature for each vexatious term and that the requirement of specific approval in writing is also fulfilled in the case of numerical references to terms provided that they are accompanied by an indication, albeit summary, of their content.[7]
2) 1341 of the Civil Code and electronic commerce.
Applying the principles summarised above to the electronic marketplace entails not a few insignificant complexities: in particular, the double signature of vexatious clauses in telematic contracts is a very complex problem that has been debated both in doctrine and in jurisprudence.
If in a sale onlineOn the one hand, it seems quite easily solvable from a practical point of view to ensure the cognizability under Art. 1341 para. 1 of the Civil Code of the general terms and conditions of the contract by means of certain expedients (e.g. the insertion of link on the site or within the order, which refer to the GTC), it is certainly more complex and less straightforward to ensure that vexatious clauses are expressly approved in writing in accordance with the dictates of the second paragraph of the aforementioned article.
The solution that is normally adopted on e-commerce is to set up two form separate, one of which is intended for the approval of the general terms and conditions as a whole (by ticking a box and accepting with a "click"so-called "click-wrapping") and one of the vexatious clauses, which are then separately accepted (albeit by means of a "click").
Jurisprudence has had several occasions to pronounce on whether acceptance by click complies with the formal requirements imposed by Art. 1341(2) of the Civil Code, recording for the time being quite opposing positions.
There is a ruling by the Justice of the Peace of Trapani stating that:
"checking a box by clicking cannot be equated with the double signature requirement of Art. 1341 of the Civil Code, since it cannot be equated with the signature of the contracting party who has not prepared the text of the agreement."[8]
This guidance echoed a somewhat less recent decision of the Court of Catanzaro in 2012,[9] in which the plaintiff had complained of the vexatious nature of the clause contained in the terms of use of the principal's (eBay's) website, which allowed the company to suspend or delete at any time, even without justification, theaccount with which the seller could use the platform.
The Court had upheld the application, finding the abusive nature of the clause and noting that eBay had not set up a valid double acceptance mechanism pursuant to Art. 1341(2) of the Civil Code, through specific approval of the adherent of the GTC by means of digital signaturesince only the latter would have guaranteed the actual acceptance of the provision and the identifiability of the subscriber.
In the writer's opinion, given that the text of Art. 1341(2) of the Civil Code does not require the specific signing of the unfair terms, but rather their approval, the digital signature should not be considered a necessary element to ensure the fulfilment of this requirement, but rather to overcome a different (and further) obstacle, i.e. relating to the proof of the traceability of the signing of an electronic contract to a well-identified person.[11]
To this end, given that such 'identification' can also be carried out in a more streamlined manner and more in line with the business needs of both parties, it could be considered that the validity of the acceptance of the general terms and conditions by click and their traceability to a particular party could be more 'strengthened' if this is collected, for instance, following a login with insertion of user name e password by the member.[12]
It should be noted, however, that more recently, in 2018, the Court of Naples, in a similar case (still concerning eBay's terms of use), instead adopted a very different orientation, considering it unnecessary to introduce the requirement of a digital signature to accept the vexatious clauses, since this solution would have led to:
"transforming all telematic contracts into binding form contracts as a matter of pretext, requiring for their conclusion the use of a sophisticated instrument, not yet massively widespread among the public, and thus effectively paralysing the development at national level of an entire sector of trade that is becoming increasingly important at planetary level".
Again in this sense, we read in a decision of the Justice of the Peace of Partanna,[10] which had held that the requirement of written form under Article 1341(2) of the Civil Code was sufficient through
"a double assent, by pressing the appropriate button: one of adhesion and the other of approval of the so-called vexatious clauses."
3) 1341 Civil Code and international trade
3.1. Waiver of Jurisdiction.
After having, albeit very briefly, analysed the main issues concerning the limits of the usability of the GTC in the context of e-commerce, we go on to examine the possibility of waiving jurisdiction in favour of the judicial authority of a Member State by simply inserting an extension clause in the general terms and conditions, to be submitted to the adherent for acceptance by a simple click.
Article 23 of the Regulation Brussels I bisprovides that the agreement conferring jurisdiction must be concluded:
- "In writing or orally with written confirmation,
- or in a form permitted by the practices established between the parties, or
- in international trade, in a form permitted by a usage which the parties knew or ought to have known [...].
- The written form includes any electronic communication that allows for a durable record of the clause conferring jurisdiction"
The European Court of Justice[13] was asked to answer whether the click-through procedure, by which a buyer has access to the general terms and conditions of sale appearing on an internet site by clicking on a hyperlink opening a window, fulfils the requirements of Article 23(2) of the Brussels I Regulation.
The case concerned a car dealer established in Germany who, after having purchased on the defendant's (a Belgian-based company's) website, sued the seller in the German court of Krefeld. The seller entered an appearance arguing that the German courts did not have jurisdiction, since Article 7 of the GTC contained a clause conferring jurisdiction in favour of the court in Leuven (Belgium).
The European Court of Justice confirmed the jurisdiction of the Leuven court, holding that the procedure of acceptance by clicking on the general terms and conditions of a contract of sale concluded electronically, which contain a clause derogating from jurisdiction, constitutes an acceptance in writing of those terms and conditions, since they are electronic communications that do not open automatically upon registration on the website, can be saved or printed before the conclusion of the contract and therefore constitutes an electronic communication within the meaning of Article 23(2) of the Regulation.
This issue was also recently submitted to the United Sections of the Supreme Court,[14] which have held that an extension of jurisdiction clause (pursuant to Article 23 of the Regulation) is valid even if it is contained in the general terms and conditions of a contract, expressly referred to in the purchase order signed by the customer and accessible from the web address referred to therein, and that prior to the conclusion of the contract, the text of those terms and conditions can be printed and saved.
The waiver of jurisdiction, therefore, does not require the specific written approval of the adherent, pursuant to Article 1341(2) of the Civil Code, since it does not fall within the vexatious clauses exhaustively listed therein. It should be noted that, according to a well-established jurisprudential orientation,[16] Article 1341 of the Civil Code dictates a criterion of jurisdiction and that this does not affect the different criteria of jurisdiction applicable to international disputes. The United Sections themselves[15] have recently pronounced themselves on this point, stating that:
"The requirement of written form, prescribed by Art. 23 of the Regulation [...], is fulfilled if the clause itself appears in the general terms and conditions of the contract, if the contractual document signed by both parties contains an express reference to the aforesaid general terms and conditions bearing that clause, without the need for a specific approval in writing pursuant to Art. 1341 of the Civil Code.
3.2. General Terms and Conditions and the Vienna Convention.
In the event that the general terms and conditions of the contract regulate international purchase and sale relations, the Vienna Convention (if any) is applicable,[17] the question arises whether or not the double signature requirement of Article 1341 of the Civil Code can be invoked.
Indeed, the Vienna Convention, like any other uniform contract law convention, does not regulate all questions that may arise in connection with the contracts it regulates; this is of no little importance if one considers that the questions that are not regulated will have to be resolved on the basis of the law applicable to the contractual relationship.[18]
On the contrary, all matters that are expressly regulated by the Convention will prevail over the rules of domestic law, which will be derogated from by it; in order to understand whether Art. 1341 of the Civil Code can be invoked in such a case, it is essential to understand whether or not the GTC are governed by such rules of uniform law.
According to more authoritative doctrine,[19] although the general terms and conditions of contract are not expressly regulated by the Vienna Convention, since in Part II thereof the "formation of the contract" is exhaustively regulated. it will be necessary to refer to the rules of the Vienna Convention in order to understand what formal requirements the GTC must comply with.
On the assumption that Article 11 of the Vienna Convention establishes the principle of the freedom of formpart of the doctrine[20] and case law[21] therefore held that in the event of the application of the Convention, the requirement under Article 1341 of the Civil Code that any vexatious clause drafted by one of the contracting parties be subject to specific written approval must be regarded as waived.
Following this principle and applying it to online sales, it can therefore be considered that, in the event of the application of the Vienna Convention, unfair terms included in general terms and conditions would not require specific approval, and could therefore also be accepted by 'click'; it would still be the duty of the originator (pursuant to Art. 9) to ensure that the adherent has been put in a position to become aware of them, by means of a 'proactive' attitude by virtue of a general obligation of good faith and commercial cooperation.[22]
[1] Bianca, Civil Law, Giuffrè, Third Edition, p. 340.
[2] Court Milan 18.6.2009.
[3] Bianca, The General Conditions of Contract, 1979, p. 2.
[4] Cass. civ. 2003, no. 1833.
[5] Cass. Civ. 2013, no. 14038.
[6] Cass. civ. 2020, no. 8268.
[7] Trib. Rimini, 4.4.2020; Cass. Civ. 2018, no. 17939.
[8] Giudice di pace Trapani, 14.10.2019, with note by Quarta La conclusione del contratto di albergo per via telematica: pagamento anticipato e revoca della prenotazione, Danno e responsabilità, 2020, 2; Giudice di pace Milano 28.01.2019, Tribunale di Catanzaro 30.4.2012, in Res. Civ. e prev., 2013, 2015 ff.
[9] Trib. Catanzaro 30.4.2012, in Contratti, 2013, 1, 41, with a note by V. Pandolfini, Contratto on line e clausole vessatorie: quale firma (elettronica)?
[10] Justice of the Peace Partanna 1.2.2002.
[11] The Court of Catanzaro itself argues that the contract is invalid because only the digital signature would have guaranteed the actual acceptance of the provision and the identifiability of the signatory.
[12] On this subject, see also Cerdonio Chiaramonte, Specific written approval of unfair contract terms, NGCC, No. 3, 2018.
[13] Court of Justice of the European Union, 21.5.2015, No. 322/14.
[14] Cass. Civ. Sec. Un. 2017, no. 21622.
[15] Cass. Civ. Sec. Un. 2020, no. 1871.
[16] On this point see Cass. Civ. Sec. Un. 1982, no. 6190, Cass. Civ. 2003, no. 17209, Cass. Civ. 2010, no. 14703.
[17] Article 1 of the Convention that it "shall apply to contracts of sale of goods between parties having their place of business in different States: a ) where those States are Contracting States; or b ) where the rules of private international law refer to the application of the law of a Contracting State."
[18] According to Italian case-law, issues relating to e.g. representation and prescription are not governed by the Convention (Trib. Padua 25.2.2004; Trib. Vigevano 12.7.2000).
[19] Ferrari, International Sale of Goods,
[20] Bortolotti F. ''Handbook of International Commercial Law'' vol. II L.E.G.O. Spa, 2010; Ferrari F. ''General Terms and Conditions of Contract in Contracts for the International Sale of Goods'' in Obb. e Contr., 2007, 4, 308; Bonell M.J. ''Le condizioni generali in uso nel commercio internazionale e la loro valutazione sul piano transnazionale'' in ''Le condizioni generali di contratto'' edited by Bianca M., Milan, 1981).
[21] Trib. Rovereto 24.8.2006; Cass. Civ. 16.5.2007, no. 11226.
[22] On this subject, Ferrari, General Terms and Conditions in Contracts for the International Sale of Goods, Obbligazioni e contratti, 2007, 308.
Agency agreement and online sales: exclusive, non-competition and indirect commissions.
If a manufacturer chooses to sell online via its own e-commerce, it will certainly have to reckon with the reactions of its agents, likewise if the manufacturer sells to wholesalers or distributors who decide to put the purchased products online. Not to mention if this strategy is implemented by some agent who decides to start promoting sales with the help of the web.
This article will analyse what legal impacts online sales have on the 'traditional' sales network, examined from three points of view, that of the manufacturer, the third party and the agent.
1. Online sales by the manufacturer and impacts on sales agents.
Before analysing what are the legal repercussions in the event of a decision to put contractual products online, the following question should be answered: can the manufacturer sell in the areas where its agents operate?
To answer this question, one has to take a few steps back and understand how the principal may actually operate within the area granted to the exclusive agent.
- Read also: Area exclusivity in the agency contract.
Exclusivity is governed by Art. 1743 of the Civil Code, which prohibits the principal, unless otherwise agreed, from using the services of other agents within the territory. According to settled case law, this clause, which constitutes a natural element of the contract, ((Civil Cass. 2012 n. 16432; Civil Cass. 2002 n. 5920; Civil Cass. 1994 n. 2634; Civil Cass. 1992 n. 5083.)) does not only bind the principal not to appoint more than one agent within the same territory, but is also intended to protect the agent from any interference by the principal within the area, including the conclusion of business within the territory itself.((Cass. Civ. 2004 No. 14667.))
On the other hand, the regulation also provides that the agent is entitled to commissions even on business concluded by the principal directly with customers '.belonging to the reserved area or category or group of customers"(Art. 1748(2) of the Civil Code); this provision would seem to confer on the principal a 'free mandate' to sell directly within the territory, on the sole condition that he pays the agent the so-called indirect commissions.
Italian jurisprudence has arrived at a compromise that takes into account the opposing interests of the parties, as governed by the above-mentioned rules, holding that the freedom of the principal must be limited to the exercise of occasional sales within the territory, as it must be excluded that the principal may carry out systematic and organised sales there sales activities. ((One reads, for example, in a recent Supreme Court ruling that: "in matters of agency relationships, the principal may not operate, on a continuous basis, in the agent's area of competence but, pursuant to Article 1748(2) of the Civil Code, is only entitled to conclude, directly, individual deals, even if of significant size, the performance of which gives rise to the agent's right to receive so-called indirect commissions. It follows that, where the proponent's intervention is merely isolated, the right to payment of the commission is, in turn, episodic and not periodic in nature, and, as such, is subject to the ordinary limitation period under Art. 2946 of the Civil Code and not to the 'short' limitation period under Art. 2948(4) of the Civil Code. (Cass. Civ. 2008, no. 15069); see also Cass. Civ. 2009 no. 8948, Cass. Civ. 1993 no. 5591; on this subject cf. Bortolotti, Distribution Contracts, 2016, Walters Kluver.))
Following this orientation, if the contract does not expressly recognise the principal's right to make direct sales (even in a structured manner) within the exclusive territory, the principal who decides to set up a sales strategy through channels online subject itself to the risk of being challenged by its agents, for breach of exclusivity, especially if the trade via web generates a substantial amount of sales.((See Cass. Civ. 2009 no. 8948 where it was "ruled out the existence of just cause for the agent's termination without notice from the agency relationship on the sole basis of the principal's failure to pay the small commissions on only nine contracts concluded directly and of a marginal total amount."))
Very interesting is the cue promoted by a part of the doctrine, ((Baldi - Venezia, Giuffrè Editore, pg. 73 et seq.)) (which probably considers the orientation of the jurisprudence referred to above as too aleatory and not in line with the literary normative dictate of Art. 1748, para. 2 of the Civil Code) on the basis of which the principal should only be prohibited from carrying out an actual promotional activity, instead deeming lawful the answering of questions from customers who spontaneously address the principal, thus extending also to this hypothesis the distinction between active and passive sales of antitrust law.
2. Online sales within the exclusive agent's territory through third-party distributors.
A somewhat different problem is to understand when sales by third parties within the agent's territory may constitute a breach of exclusivity.
As analysed above, unless otherwise agreed, the exclusive agent is entitled to formerly Art. 1748(2) of the Civil Code to commissions also on all sales that the principal makes within its territory; it is therefore common ground that if the principal makes sales to a wholesaler based in the contract territory, the agent may claim the right to payment of indirect commissions. In order to understand whether the customer (legal entity) may be considered to be within the territory, it is appropriate to refer to a fairly old judgment of the Court of Justice, ((Judgment Kotogeorgas v Kartonpak of 12.12.1996, Case C-104/95.)) more recently confirmed by the Court of Cassation,((Cass. Civ. 2012 no. 5670.)) which clarified that any legal entity having its head office in the territory in which the agent enjoys exclusivity belongs to the zone.
It is less clear and obvious whether this third party, once it has purchased products from the principal, makes sales online directly to customers in the agent's reserved area, the agent may claim the right to commission from the principal.
Also responding to this question was a more recent ruling of the European Court of Justice:
"Article 7(2), first indent, of the Council Directive 86/653/EEC of 18 December 1986on the coordination of the laws of the Member States relating to self-employed commercial agents, must be interpreted as meaning that a commercial agent entrusted with a specific geographical area is not entitled to commission for transactions concluded by clients in that area with a third party without the direct or indirect intervention of the principal."It follows that there will only be a breach of exclusivity and the agent will only be entitled to an indirect commission if there has been direct or indirect intervention by the principal in sales made in the territory by third parties, ((Cass. civ. 2017 No. 2288.)) with the aim of de facto depriving the agent of business that the latter could have concluded.((See the principle established by the Court of Cassation sez. Lav. in judgment 2011 no. 11197.))
3. Online sales by commercial agents.
In contrast to distribution contracts, in agency contracts the principal may prevent the agent from carrying out online sales promotion activities (unless the agent, due to the manner in which he or she carries out his or her activities, is to be regarded as subject to antitrust law).
- Read also: Can a manufacturer prevent its distributors from selling online?
The question then arises, is the agent free to decide to start promoting online sales?
In fact, should an agent decide to do so, he or she will run afoul of what is the typical prerogative of the webi.e. that it is by its very nature visible everywhere and that any limitation aimed at preventing unjustified geographical blocks would even be contrary to European law.
- Read also: Geoblocking: what is it and when does it apply?
On the other hand, as already explained at the beginning of this article, the agency relationship provides as a natural element of the contract the obligation of exclusivity to which the parties are bound and which any breach entails contractual offences. In particular, if the agent makes out-of-area sales, it will be in breach of the exclusivity covenant vis-à-vis the principal, since in such a case it will not be able to claim any commission being reserved exclusively for the agent of the area where it made the sale.
If, on the other hand, the contract provides for such out-of-area sales, the exclusive agent where the sale was made may bring an action against the principal for breach of the agreements between them.
Placing these principles in the online market, the question that arises is whether the mere existence of a website where sales of contractual products are offered (which by its nature is also visible outside the agent's assigned area) should be considered as a sales promotion activity that infringes the exclusivity of other agents.
To date, there appear to be no case law precedents that have answered this question, and in order to find a (at least plausible) solution, it is necessary to go back over the general principles on the subject of agency, recalling the principles dictated by antitrust law, taking into account the peculiarities of the market online.
Based on the Orientations of the Commission, the mere existence of an Internet site must in principle be regarded as a form of passive selling. Indeed, it reads:
"If a customer visits the Internet site of a distributor and contacts him, and if that contact results in a sale, including actual delivery, this is considered a passive sale. The same applies if a customer decides to be informed (automatically) by the distributor and this results in a sale."((LGC No. 52.))
Otherwise, it must be considered an active sale:
"Online advertising specifically targeted at certain customers [...]. Banners showing a territorial link on third party websites [...] and, in general, efforts made to be found specifically in a certain territory or by a certain group of customers".((LGC No. 52.))
It would therefore be consistent with antitrust law and European competition law to hold that the agent's breach of exclusivity only arises in the case of 'active' sales promotion activities, since otherwise it would have to be held that the mere answering of questions from customers outside the area, who spontaneously approach the agent, would only result in the agent's commission not being recognised.
In view of what would in any case be the impact on the sales network of the establishment of an online distribution system, it is advisable to consider very carefully regulating contractual relations in a manner consistent and aligned with the actual distribution strategies to be implemented.
Agent's right to commissions on business concluded after termination of the relationship.
When the agency relationship comes to an end, it is often the case that the agent has reported some business, or has simply started negotiations that resulted in an agreement following the termination of the contract.
In some (rarer) cases, the agent has concluded long-term contracts before the termination of the relationship.
Understanding whether or not the agent is entitled to commissions on business concluded after termination is of essential importance
In order to understand whether the agent is entitled to commission on business concluded after the termination of the contract, it is first necessary to identify which of these business transactions fall under the terminated relationship and which are to be regarded as excluded, since it is from this that the actual accrual or non-accrual of commission is determined.
In this article we will first briefly analyse the more typical case, relating precisely to business concluded after the termination of the relationship, and then delve into the rarer (but no less important) case of long-term contracts, which were concluded before the termination of the agency relationship.
1. Commissions on contracts concluded after the termination of the contract.
1.1. Civil law regulations.
Following the termination of an agency relationship, it is often the case that the agent has reported certain business to the principal, or has initiated certain negotiations that resulted in an agreement following the termination of the contract. In such cases, it is necessary to understand which of these deals fall under the terminated relationship and which are to be regarded as excluded, since the actual accrual or non-accrual of commission is determined by this.
This issue is governed by para. 3 of Civil Code 1748, which provides that the agent is entitled to commission on business concluded after the date of termination of the contract if:
- "the proposal was received by the principal or agent prior to or
- the business is concluded within a reasonable time from the date of termination of the contract and the conclusion is predominantly attributable to the activity performed by the agent, unless specific circumstances show an equitable distribution of the commission among the agents involved."
This approach[1] is intended to prevent the principal from running the risk of paying a double commission: one to the outgoing and one to the incoming agent.[2] In the event of termination of the relationship, therefore, the agent will be entitled to the commission:
- whether it forwarded the order to the principal prior to the termination of the contract, or whether the principal received it directly from the local customer (in the event that the agent is entitled to indirect commission);
- In other cases, the commission is only due if the deal has been concluded within a reasonable term from the date of termination of the contract and the conclusion is mainly attributable to to the activity carried out by the agent himself.
The second hypothesis, i.e. the one that recognises the agent's commission even if the proposal is received after the termination of the relationship, as long as it is concluded within a reasonable time, certainly requires more attention.
One of the major problems of interpretation is to identify what is to be understood by 'reasonable time'i.e. what is the maximum time limit for the agent to still be entitled to commission. On this point case law is not uniform, one reads of cases that have set this term at six months[3] and others who considered an even two-year time limit reasonable.[4] However, it must be held that the reasonableness of the time limit must also be judged on the basis of the industry sector in which the agent has operated and the customs in force in that relationship.
1.2 The AEC Framework.
Certainly clearer is the discipline of AEC Industry 2014which in Art. 6, last paragraph, provide that the agent is entitled to commission on the business proposed and concluded even after the termination of the contract, not only if the conclusion of the business is the effect of its activity, but also make it subject to the fact that
- Upon termination of the relationship, the agent must report to the principal in detail on the commercial negotiations undertaken, but not concluded, due to the termination of the agency contract;
- if, within a period of six months from the date of termination of the relationship, any such negotiations are successful, the agent shall be entitled to the relevant commissions;
- Once that period has elapsed, the conclusion of any order, whether or not included in the agent's report, shall no longer be considered a consequence of the agent's activity and no commission shall therefore be paid;
- no commission shall be due for business concluded even within six months, but not indicated in the report.
2. The right to commissions on long-term contracts.
Where the agent in the course of the relationship promotes term contracts, the entitlement to commission on deliveries made in performance of the contract procured after the termination of the relationship depends essentially on the nature of the term contract.
In principle, in the event that the term contract is a a supply contract, a subcontracting contract, or a sales contract with divided deliveriesit may be stated that (unless otherwise agreed),[5] the agent is entitled to commission on all deliveries made even after termination of the agency contract, since these are in fact acts of performance of a contract concluded in the course of the relationship.
Conversely, where the contract promoted is a framework contractwhere each supply is to be the subject of a further agreement (order - acceptance), in which case the individual supplies are to be regarded as independent sales contracts,[6] even if concluded in the context of the framework contract, with the consequence that such subsequent sales contracts will not give rise to an entitlement to commission (unless the agent can prove that such business is attributable to its promotion activity and was concluded within a reasonable time).
Continuing with the reasoning, if, on the other hand, the term relationship is signed by the principal following the termination of the relationshipIn order to understand whether the agent may be entitled to commission, it will not be sufficient to ascertain the nature of the relationship of duration, but also to prove that the conclusion of the transaction is attributable to the agent's promotional activity.
A very interesting case is recalled below,[7] which was decided by a series of three judgments of the Court of GrossetoA case in point was the following: an agent, following burdensome negotiations lasting several months, had procured for the principal (a company operating in the frozen food sector) a deal with a chain of supermarkets for the indefinite supply of frozen and pre-packaged ready meals. The administration contract was concluded a few months after the termination of the agency relationship.
The agent sued the principal for payment of commissions on supplies made in performance of the supply contract. By judgment No. 52/2012, the Court of Grosseto upheld the agent's claims, holding that:
"the administration contract was formally concluded [...]. just over two months after the termination of the agency contract [...], a term that must be considered, due to its objective brevity, absolutely reasonable.
Although the Court had found that the agent was entitled to commissions, it rejected the plaintiff's claim seeking an order that the principal pay them
"until the end of the administration contract [...] as this would be a pronouncement of sentence 'in the future' related, moreover, to a term that was not identified by the parties in the administration contract, since the same contract was concluded for an indefinite period."
The agent, a few years after the delivery of the first judgement, brought a further action, in which it sought an order that the principal be ordered to pay commissions on supplies made after the expert valuation referred to in the first judgement. The agent based its claim on the principle of Article 2909 of the Civil Code.according to which the finding contained in the final judgment shall be conclusive for all purposes between the parties. The Court again condemned the principal, stating that
"the right to obtain the payment of the commissions that will gradually accrue in relation to the prolonged performance of the supply contract, is unquestionable and has already been ascertained in the irrevocable ruling issued by this Office with the consequent application of the revocatory effect provided for by Article 2909 (on this point, among others, Court of Cass. Sez. Lav. 2001 no. 4304).
Following this ruling, in order to avoid the payment of commissions on future business, the principal proceeded to effectively giving up the business to a company of the same group, also active in the frozen food sector. The agent then appealed again to the Court of Grosseto, arguing that the assignment of the duration contract pursuant to Article 1406 of the Civil Code entailed the transferee's obligation to pay commissions. The Court of Grosseto,[8] again supported the plaintiff's argument, stating that:
"since the characteristic feature of the assignment of the contract under Art. 1406 of the Civil Code is that it has as its object the transmission of a unitary set of active and passive legal situations resulting from each party to the contract [...], the transferee shall be obliged to pay to the plaintiff commissions - in the same amount as agreed in the agency contract - on the supplies of frozen food products made to X srl."
3. Commissions on long-term contracts and severance payments.
Lastly, it should also be emphasised that the signing of term contracts can be used as a determinant for prove that the conditions required by Article 1751 of the Civil Code are fulfilled.for the agent's right to receive severance pay (cf. Agent's severance pay. How is it calculated if AEC does not apply?). We read in an interesting Supreme Court ruling that:
"The termination indemnity compensates the agent for the asset increase that its activity brings to the principal by developing the goodwill of the business. It follows that this condition must be deemed to exist, and the indemnity is therefore due, where the contracts concluded by the agent are contracts of duration, since the development of goodwill and the continuation of benefits to the principal, even after the termination of the agency relationship, are in re ipsa'..[9]
[1] Article reformed by Legislative Decree No. 65/1999, by which the legislature transposed the principles of European Directive No. 86/653 and, in particular, Article 8, which provides as follows: "For a commercial transaction concluded after the termination of the agency contract, the commercial agent shall be entitled to commission; (a) if the transaction is mainly due to the result of the work performed by him during the agency contract and if the transaction is concluded within a reasonable period after the termination of the agency contract, or (b) if, in accordance with the conditions set out in Article 7, the order placed by the third party was received by the principal or the commercial agent before the termination of the agency contract. "
[2] Cf. Court of Rimini, 22.9.2004, No. 238, which excluded the agent's right to commissions in the event of extensions of supply offers, given the absence of the former agent's preponderant promotional intervention. On this point see VENEZIA, Il contratto di agenzia, pg. 281, 2015, CEDAM.
[3] Cass. Civ. 2006, no. 2824, in Leggi d'Italia
[4] Cass. Civ. 2013, no. 894, in Leggi d'Italia
[5] Art. 1748 para. 3 of the Civil Code, on commissions due for business concluded after termination of the contract, is entirely derogable: in favour Saracini-Toffoletto, Il contratto di agenzia. Commentario, 2014, GIUFFRÈ and Bortolotti, op. cit., p. 276; contrary, Trioni, who holds that this rule is not mandatory, given that the third paragraph of Art. 1748 cc, unlike the second and fourth, does not expressly provide for the salvation of contrary agreements.
[6] See on this point BORTOLOTTI, Concessione di Vendita, Franchising e altri contratti di distribuzione, p. 8, 2007, CEDAM.
[7] For more details see Giulia Cecconi, Le provigioni sui contratti di durata, in Agents and sales representatives, 1/2019, PUBLISHING AGE.
[8] Court of Grosseto, Judgment No. 269 of 2018.
[9] Cass. Civ. sez. lav. no. 24776 of 2013.
The influencer (or youtuber) is a commercial agent: food for thought.
The influencer often carries out a sales promotion activity for a fee: does this make him a commercial agent?
In order to legally frame the figure of theinfluencerit is necessary to start with a brief analysis of their activity, trying to give it a, albeit generic, definition. L'influencer, as the word itself implies, is a person who is able to influence the opinions and attitudes of other people, because of his or her reputation and authority on certain issues or areas of interest.[1]
In particular, the marketing influencer is an industry expert (which can range from fashion, to travel, music, technology, etc.) that, with its posts, allows it to offer greater visibility to products or services it promotes, using the web channels it considers most appropriate and adequate (Instagram, Youtube, Facebook, a personal blog, etc.).
L'influencer Precisely because of the decisive role it plays within the communication processes, it is often commissioned by companies in the sector in which it operates to advertise their products, thus carrying out a sales promotion activity, which is remunerated through the payment of a fee.
Precisely because theinfluencer often carries out a sales promotion activity for a fee, typical of the better-known figure of the commercial agent, the question may arise as to whether theinfluencer (in certain hypotheses), may be accumulated to such a contractual figure (see on this point But are online platforms commercial agents?)
Before proceeding to this analysis, it is important to clarify that, with this article, we want to give some food for thought, mainly aimed at trying to better frame the new modes of intermediation, with the intention of 'monitoring' the development of distribution techniques, with the help of new technologies.
If the contractual relationship between the company and influencer is governed by a written agreement, the point of reference for the interpreter's activity must certainly be the text of the negotiated declaration in the first place.
In any case, although the negotiated text is the first parameter of interpretation, for a correct exegesis one must not limit oneself "to the literal text of the words" (Art. 1362 of the Civil Code), but it is necessary to seek, through an overall examination of the deed, by interpreting the clauses of the "one through the other" (Art. 1363 of the Civil Code), what was the result pursued by the conclusion of the agreement, i.e. what was "the common intention of the parties", i.e. the meaning they both attributed to the agreement[2].
In order to trace the will of the parties, it will be necessary to take into account how the relationship actually developed.influencer to the producing company by analysing some of the typical contractual elements of the agency, namely whether:
- there is or is not a consultancy activity in addition to sales promotion;
- there is an obligation of stability of tenure;
- the company has the power to dictate the market guidelines and strategies of theinfluencer;
- there is a contractual non-compete clause;
- there is a commission payment, based on sales made.
Since there is no single, 'decisive' element to understand whether a given relationship qualifies as an agency, it must be considering the different typical elements in the individual case of this contractual figure, bearing in mind that none of them alone allows the relationship to be correctly framed, but rather an overall assessment of all of them must be carried out.[3]
1. There is a consultancy activity alongside the promotion activity?
Sometimes the contractual relationships that bind the influencer to companies are governed by consultancy contracts, remunerated through the payment of a fixed fee, sometimes coupled with a variable fee, calibrated on the sales generated by the promotional activity of theinfluencer.
There is no doubt that often theinfluencer performs a genuine consulting activity, being a professional who knows the market of social and the company contacts him, not only for his notoriety, but also to understand how to advertise products through the use of digital platforms.
It is also true that it is far from unusual for published posts and videos to be 'accompanied' by a linkwhich redirects the consumer to a particular shop online (which can be either the manufacturer's or a third party's), where it is possible to purchase the product advertised by theinfluencer.
Any purchase by the consumer through the use of this link is tracked, thus enabling the parties to verify the sales actually realised through the promotional activity of theinfluenceron which variable remuneration may be calculated.
In that case, one would be faced with a so-called ' contractmixed"consisting of the merger of the causes of action of two contracts: a contract of brokerage and a contract for consulting services. According to case law, in the event the parties enter into a contract of this nature mixedthe same shall be subject to the unitary discipline of the prevailing contract. It is stated on this point that:
"The mixed contract, consisting of elements of different types of contract, is not only unique, but has a single and inseparable cause, in which the elements of the different types that constitute it are combined. It is subject to the prevailing contract and predominance is determined on the basis of economic or other indices, such as the "strength" of the type or the interest that moved the parties, unless the elements of the non-prevailing contract, regulated by its own rules, are incompatible with those of the prevailing contract."[4]
In the light of the above, in order to understand which category to subject the brokerage/consultancy relationship to, it will be necessary to refer to how the relationship has actually developed over the years and to verify whether or not the consultancy activity takes precedence over the brokerage activity, noting that, if so, it would be more complex to consider the relationship as an agency contract (Main differences between the agency contract and the commercial distribution contract).
2. Absence of an obligation of stability of tenure
To understand whether the relationship between the company and influencer may be subject to the agency discipline, it is certainly essential to ascertain that the sales promotion activity (and not only the positioning of the brand) is carried out with stability. As has already been discussed (cf. What is the difference between an agency contract and a business intermediary?) is precisely the obligation to promote sales with stability one of the distinctive elements of the agency contract. It is stated in case law that:
"while the agent is the part that assumes permanently the mandate to promote on behalf of the other (principal or principal), the conclusion of contracts in a specific area, the business procurer is the person who collects orders from customers and transmits them to the company from which he has been commissioned, without stability constraint (unlike the agent) and on an entirely occasional basis [...].
Thus, while the agent's service is stable, as he is obliged to carry out the activity of promoting contracts, the procurer's service is occasional, in the sense that it depends exclusively on the his initiative.[5]"
If ascertaining the stability of the assignment is already a complex activity in the case of brokering "traditional'.is certainly even more so if the promotion activity is carried out online. Consider the (not uncommon) case of a influencer reviewing a product on youtube. The activity they perform is to create a video and post it on the platform.
The effects of such promotional activity, in any event, last over time, sometimes for months or even years (normally until the product reviewed is superseded by a new product launched by the parent company, or until the video is deleted from the web). In such a case, one would need to understand whether or not this promotion activity that unfolds its effects over time can be considered 'stable' within the meaning of an agency relationship.
While it is certainly not easy to give an unequivocal answer to this question, it is certainly without doubt advisable to contractually regulate the manner of payment of remuneration on sales conveyed by this post realised after the termination of the relationship between influencer and company.
(On this subject, cf. The commercial agent's commissions for business concluded by the principal after termination of the relationship; ...but if the commercial agent has procured long-term contracts and the relationship is dissolved before their expiry...).
3. Duty of the principal to impart market guidelines and strategies
A second distinguishing point of the figure of the commercial agent is certainly constituted by the obligation he assumes to follow the instructions of the principal, who is the party responsible for deciding market policies and imparting commercial strategies to the distribution network. Article 1746(1) of the Civil Code expressly provides that the agent must:
"perform the task entrusted to him in accordance with the instructions received [...]'.[6]
In the agency relationship, it is the responsibility of the principal to devise sales and marketing strategies. marketingstrategies to which agents normally belong and to which they must adhere in the performance of their duties, always within the limits prescribed by the principal.
It follows that the agent has a duty to follow the principal's instructions and is obliged to act in accordance with his instructions, also with regard to the objectives to be pursued and the results to be achieved, and may not refrain from adopting certain sales methods or techniques. marketing developed by the principal.[7]
Once again, as analysed in point 1 of this article, it will be necessary to check very carefully whether theinfluencer is obliged to follow the general directives of the company, or is he himself directing the company in its choices of strategy and marketing in the area of its competence (on this subject cf. The agency contract and the employment relationship: distinguishing criteria and evaluation parameters.).
4. Absence of non-competition
Article 1742 of the Civil Code provides that:
"The principal may not use more than one agent in the same area and for the same line of business at the same time, nor may the agent take over the business of several competing undertakings in the same area and for the same line of business."
According to settled case law, the non-competition clause is a natural but not essential element of the agency contract[8]with the consequence that the parties are free to regulate their relations differently either by an express agreement or by concluding behaviour[9] (on this subject see also Area exclusivity in the agency contract e Agency contract, exclusivity and indirect commissions.).
Although an agent is normally free to act by promoting several competing products, such an 'open' mode of promotion is certainly anomalous and is found in a more limited number of contractual relationships.
Applying this principle to the present case, it could be said that if a influencer carries out its activities in favour of several competing companies, without any of the intermediaries raising any objection as to the manner in which they operate, this element could be a clue which, although in itself cannot absolutely exclude the relationship from being classified as an agency, if combined with those already analysed above, could be a component that could influence its classification
5. Payment of commissions
Where the contract expressly provides as a method of calculating the consideration of theinfluencer the commission payment, this alone cannot be regarded as a sufficient element to be able to identify the relationship as an agency. The parties, in fact, whether they wish to conclude an agency contract or a consultancy/service contract, may freely (formerly Article 1322 of the Civil Code) define the remuneration terms that they deem to be the most appropriate and suitable in the case at hand.
Suffice it to say that if the relationship were to be framed as an atypical contract for the provision of services, Article 1657 of the Civil Code on the subject of contracts gives the parties complete freedom to decide on the manner of payment and calculation of services, which may therefore also be of a commission nature.
That being said, it cannot however be denied that the payment of the activity by means of the acknowledgement of a commission is typical of the agency relationship and it must therefore not be excluded that this must be taken into account when interpreting the contractual relationship.
In the event, the relationship is only remunerated with a fee in fixed formAlthough the European directive does not exclude the reconciliation of this method of remuneration with the figure of the agent, Italian jurisprudence (criticised by part of the doctrine[10]) stated its opposition to this argument,[11] considering that in that case the intermediary would not assume any entrepreneurial risk, which is a distinguishing feature of the figure of the agent.
A different matter, however, if the relationship were to be remunerated through the payment of a mixed remunerationunder which a fixed component is combined with a variable component. Such a solution whereby the agent is assured a "guaranteed minimum"is considered lawful and compatible with the agency employment relationship.[12]
Those analysed above are only a few elements that allow the interpreter to understand how best to frame a "dubious" contractual relationship, which must however be carefully analysed in its entirety, verifying the individual elements that characterise such a complex and versatile contractual figure.
[1] https://www.glossariomarketing.it/significato/influencer/.
[2] TORRENTE - SCHLESINGER, Handbook of Private Law, § 311, GIUFFRE EDITORE.
[3] Bortolotti, Distribution Contracts, p. 129, 2016, Wolters Kluwer.
[4] See Trib. Cagliari, 4. 5.2017; Trib. Firenze Decreto, 2.11.2016, Trib. Taranto Sez. I, 11.8.2016, Trib. Milano Sez. VII, 29/02/2012; Cass. civ. United Sect., 12.5.2008, n. 11656.
[5] Tribunale di Firenze Sez. lavoro, 4.3.2014.
[6] This obligation is also found in Art. 5, para. 2, AEC Industry 2014 and Art. 3, para. 2, AEC Trade 2009.
[7] On this point see also Bortolotti, Distribution Contracts, Wolters Kluwer, 2016, p. 166 et seq.
[8] Cass. Civ. 2002 no. 5920, Cass. Civ. 1994 no. 2634, Cass. Civ. 1992 no. 5083.
[9] Cass. Civ. 2007 no. 21073, Cass. Civ. 1992 no. 5083.
[10] PERINA - BELLIGOLI, The Agency Relationship, p. 27, Giappichelli Editore; Saracini-Toffoletto, p. 327 ff.
[11] Cass. Civ. 1986 no. 3507; Cass. Civ. 1991 no. 10588; Cass. Civ. 2012 no. 12776. The latter judgment went so far as to admit that "in the agency relationship the parties may provide for a form of remuneration for the agent's services other than a commission determined as a percentage of the amount of business concluded (such as a fixed sum for each contract concluded), but without going so far as to acknowledge that remuneration in the form of a commission can be entirely replaced by a fixed remuneration.
[12] See on this point Cass. Civ. 1975 no. 1346; Cass. Civ. 1980 no. 34; Trib. Di Milano 9 September 2011.
The effects of the coronavirus on agency and distribution contracts.
The restrictive measures the government has taken against the coronavirus through the DCPM of 11.3.2020,[1] have led to the suspension of a large number of commercial activities, with a serious impact on existing contractual relationships. This article will attempt to focus attention on agency and distribution contracts, trying to understand what remedies are provided by our legal system to deal with the problems that are most likely to arise between the parties.
In contractual matters, following the above-mentioned ministerial order, the legislator did not intervene with measures ad hoc (only a few measures of a predominantly tax and contribution-related nature are to be found in agency matters),[2] merely providing in Article 91 Decree-Law of 18 March 2020, better known as 'Cura-Italia', on the subject of "provisions on delays or breach of contract resulting from the implementation of containment measures", as follows:
"compliance with the containment measures set out in this decree shall always be assessed for the purpose of excluding, pursuant to and for the purposes of Articles 1218 and 1223 of the Civil Code, the debtor's liability, also with respect to the application of any forfeiture or penalty related to delayed or omitted performance. "
The sense of this regulatory provision would seem to delegate to the judge a more accurate and prudential assessment of a possible culpable breach (Art. 1218 of the Civil Code) caused by the "compliance with containment measures" of the pandemic, also for the purpose of quantifying damages (art. 1223 Civil Code), raising compliance with these measures to a parameter for assessing the imputability and importance of the breach (art. 1455 Civil Code).
1. Civil law regulations.
As is well known, Art. 1218 of the Civil Code establishes the criteria for determining the liability of a debtor who fails to perform its bondby providing for its exemption from liability for damages (Art. 1223 of the Civil Code) whenever the non-performance or delay was caused by impossibility of performance resulting from a cause not attributable to it (Art. 1256 of the Civil Code).[3]
Art. 1256 of the Civil Code also provides that supervening impossibility may lead to the extinction of the obligation, although a distinction must be made between the case of definitive impossibility e impossibility temporary. While the former, being irreversible, extinguishes the obligation automatically (Art. 1256(1) of the Civil Code), the latter determines the extinction of the obligation only if it lasts until such time as the obligor can no longer be required to perform the obligation, or the obligee no longer has an interest in performing it.[4]
Given that in the contracts for consideration the impossibility of performing an obligation does not always automatically imply the impossibility of performance (e.g. if the seller cannot deliver a product, the buyer may still be able to pay the price of the thing sold)[5] The legislature intended to protect the non-performing party by providing in Art. 1460 of the Civil Code that either party may refuse to perform its obligation if the other does not perform or does not offer to perform at the same time, unless otherwise agreed in the contract (i.e. the seller may refuse to make payment if the manufacturer does not deliver the goods).
However, this exception may only be raised if there is proportionality between the two benefits, taking into account their respective impact on the balance of the relationship.[6]
In order to prevent the contractual relationship from being transformed into a "limbo" in which both parties merely declare that they do not wish to perform their respective obligations, if the non-performance (in our case of the seller) depends on supervening external factors (e.g. If the non-performance (in our case, the seller's non-performance depends on supervening external factors (e.g. the suspension measures of the covenant-19) the legislature (taking over the general principles dictated on the subject of rescission of the contract for non-performance, as in Art. 1453 of the Civil Code), provides the parties with certain remedies for cases where the impossibility is total or only partial.
Art. 1463 of the Civil Code (total impossibility) provides that the party who has been released from its obligation due to the supervening impossibility of performance (e.g. the seller who because of covid-19 can no longer deliver fruit that has perished because it could not be harvested during the pandemic), may not claim the counter-performance (i.e. payment of the price) and must also return what it may have already received (e.g. an advance).
Art. 1464 of the Civil Code (partial impossibility), on the other hand, provides that when the performance of one party has become partially impossible (e.g. delivery of 50% of the goods sold), the other party is entitled to a corresponding reduction of the performance owed by it (payment of 50% of the goods delivered), or may dissolve the contract if it has no appreciable interest in partial performance.
Thus, while in the case of total impossibility the termination of the contractual relationship operates as a matter of right, in the case of partial impossibility the party suffering the non-performance may opt for partial performance or (if there is an appreciable interest) termination of the contractual relationship.
Still different is the case governed by Art. 1467 et seq. of the Civil Code, relating to relationships with continuous or periodic performance, or with deferred performance, where due to external factors the performance of one of the parties requires efforts that are excessive and disproportionatethan those that were enforceable once the relationship had been entered into. Even in such a case, the party who suffers the excessive onerousness of the performance may request the termination of the contractual relationship if a serious economic imbalance is created between performance and counter-performance.
In this case, the party against whom termination is sought may avoid it by offering (formerly Art. 1467(3) of the Civil Code) to modify the terms of the contract in an equitable manner so as to bring the relationship between the performances within the limits of thenormal alea of the contract.
It is therefore very important to emphasise that the does not provide for an obligation of the parties to renegotiate and reschedule the relationshipSuch an obligation cannot be inferred from an extensive application of the principle of good faith under Art. 1374 of the Civil Code, the subject matter of which is a different case. Nor, in the writer's opinion, can such an obligation be derived from an extensive application of the principle of good faith set forth in Art. 1374 of the Civil Code, which has as its object the different case of "integration of the contract" in cases of incomplete or ambiguous expression of the contracting parties' will (and not of modification of the contractual terms, in the event of variations in the equilibrium position of the contractual relationship due to facts not attributable to the parties).[7]
Bearing in mind that these are the instruments offered by the legal system, we go on below to try to respond to some of the problems that may arise in the context of commercial distribution, bearing in mind that the legislature's reference to the institutions set forth in Articles 1218 and 1223 of the Civil Code suggests that the legislator's concern was above all to keep contractual relations alivewhere possible and in the interest of the parties.[8]
2. Effects on distribution contracts
2.1. What happens if the manufacturer can no longer supply its distributors and/or customers because of the coronavirus?
As a general rule, if the manufacturer cannot supply its distributors due to a blockage and/or slowdown in production due to the implementation of government restrictive measures, it cannot be held liable for such delays if the impossibility was original (thus not known at the time the obligation arose) and occurred after the debtor's default (Art. 1219 of the Civil Code), the contract being in a state of 'quiescence'.
Whether it was foreseen (expressly or implicitly) for the delivery of the goods[9] a essential term (Art. 1457 of the Civil Code), the relationship will be terminated as of right once the term has expired.
If, on the other hand, the time of delivery of the goods is not essential, the contractual relationship is extinguished if the impossibility continues until the purchaser can no longer be considered obliged to perform, or if the purchaser's interest in obtaining performance ceases to exist.[10] The purchaser's right not to terminate the agreement and to demand only a reduction of the price, if the performance is/can be only partially performed (e.g. delivery of only a single batch of the purchased goods), shall remain unaffected.
2.2. Can the distribution agreement be terminated because of the pandemic?
The subject of the dissolution of the distribution relationship has already been dealt with in this blog, and reference is made to that article for further discussion.
The termination of the sales (or distribution, as the case may be) licence agreement.
As explained (briefly) in the introductory part of this article, the party who "suffers" the temporary non-performance may terminate the relationship if it has no interest in the partial continuation of performance. Therefore, given that due to covid-19 the distribution relationship is interrupted for a term that may be more or less prolonged, the interest in the continuation of the distribution contract must certainly be calibrated taking into account mainly two factors: the actual duration of the event (in this case the pandemic) and the remaining duration of the contract.
As a general rule, it may be said that the more prolonged the effects of the restraint and the closer the natural expiry date of the relationship, the greater will be the possibilities of terminating the obligatory relationship. Of course, in this assessment, one must also take into account the indirect effects of the restrictive measures, which are linked to a reasonable expectation of one of the parties of the perpetuation of a very important decline in trade even after the end of the blockade.
Furthermore, if one of the parties is contractually obliged to incur high costs for maintaining the distribution relationship (rent, employees, showroom, etc.) that make the collaboration no longer de facto sustainable, it may consider terminating the relationship for excessive onerousness pursuant to Art. 1467 of the Civil Code.
In this case, the party against whom termination is sought may avoid it by offering (Art. 1467(3) of the Civil Code) to modify the terms of the contract in an equitable manner so as to bring the relationship between the performances within the limits of thenormal alea of the contract.
2.3. Can the parties not respect the non-competition agreement?
The covenant of competition in distribution (and agency) relations may be agreed in two ways, namely:
- the manufacturer undertakes to supply only the distributor in a given territory;
- the distributor undertakes to purchase certain products only from the manufacturer.
If, because of covid-19, the manufacturer can no longer supply its distributor because it has been placed under a production freeze, i.e. the distributor can no longer perform because of the freeze, even though the manufacturer has the possibility of supplying it (e.g. because it had in stock the material), the question arises as to whether the party that no longer has an interest in maintaining the non-compete obligation due to a fact attributable to the other contracting party may decide not to perform its obligations by using the legal means referred to above.
On the assumption that the law does not provide for any obligation of the parties to renegotiate the original contractual arrangement,[11] the existence of a principle authorising one party to oblige the other to modify the contract in the interests of rebalancing cannot be inferred.
It follows that a temporary suspension of the non-compete clause (in the writer's opinion) is not legally foundedif this does not result from an agreement of both parties. Conversely, if the prohibition of 'competing' activities for the period in question creates unsustainable conditions, one may possibly consider terminating the contractual relationship on the ground of supervening impossibility or excessive onerousness.
2.4. Should advertising budgets be provided and spent as agreed even if distribution is not possible due to the pandemic?
If one of the parties is contractually obliged to incur fixed costs for marketing and advertising, might find itself in the position of deciding not to incur such expenses, believing that they are not necessary due to the halt in production.
In order to understand whether (and which) marketing activities can be blocked, it is necessary to analyse the nature of the individual advertising/marketing activities. It can tend to be said that all those 'general' activities that serve to maintain the brand positioning within the market, must be carried out even in the event of a distribution blockade, as they are in fact necessary prior to reopening.
A different reasoning should be made on the activities of marketing relating to sales actions that cannot be performed during the pandemic. In such a case, the problem is not so much that those performances cannot be performed (and thus permit the invocation of supervening impossibility), but rather the fact that they do not bring any commercial advantage to the party promoting them; moreover, very often those expenses will not burden the party obliged to bear them so much economically that they can sustain the breach of the contractual equilibrium and thus permit the invocation of the supervening excessive onerousness of the performance.
In such a case, if the parties fail to reach an agreement, the party obliged to perform the promotional activity may have as its only (rather blunt) weapon the decision not to perform and thus not to carry out such activities, relying essentially on the fact that the non-performance may be deemed by the court (having regard also to Art. 91 of the above-mentioned Decree) to be of minor importance (Art. 1455 of the Civil Code), taking into account that the performance would not have brought any commercial advantage to the parties in any event.
3. Effects on agency contracts
3.1. Does the principal still have to pay a fixed commission/expense reimbursement, if contractually agreed?
Especially in agency contracts, it is often stipulated that the entrepreneur pays a monthly fixed amount (as reimbursement of expenses, or as a fixed commission) to which a variable part is normally added.
In this period, since the promotion activity has in fact been largely blocked, one wonders whether the principal might decide to remove (at least this phase) this fixed part.
As noted above, although the law does not provide for an instrument entitling a party to unilaterally modify the contract, it is not at all atypical to find in agency contracts contractual clauses conferring on the principal the potestative right to unilaterally modify the agent's commissions, territory and/or customers.
Cf. Unilateral changes to the agency contract by the principal.
According to the prevailing view of the Court, the granting of this power to the principal must "be justified by the need to better adapt the relationship to the needs of the parties as they have changed over time".[12] It may therefore be held that the adjustment of the commission fee on account of covid-19 can only be legitimately implemented if there is a contractual clause providing for such an option on the part of the principal, who will in any event be obliged to avail himself of it in a reasonable and appropriate manner.
It is a different matter, however, if AECs apply to the agency agreement, which confer on the one hand the possibility of the principal to modify the agent's commissions, but on the other hand the right of the agent to reject the modifications and terminate the relationship for cause if those modifications are significant (on this topic see commission changes based on AECs). It is argued that this rule cannot be altered in favour of the principal even taking into account the impact of the covid-19 on the principal's sales network, who must be aware that any change in the commission may lead to a termination of the relationship for cause by its agent.
3.2. What should agents do if they cannot visit their customers?
It is clear that if the agent can no longer visit his customers, he will not be forced to do so; moreover, if before the pandemic he did not carry out any promotion activities online and was not contractually obliged to do so, the principal will certainly not be able to impose disproportionate efforts on his agent by requiring the latter to engage in 'telematic' promotion by using new computer tools.
3.3. What are the consequences of not reaching the turnover minimums due to covid-19?
In recent years, the jurisprudential orientation is becoming more and more established[13] which, while confirming the unquestionable applicability of the general rule under Article 1456 of the Civil Code on the subject of express termination clauses, nevertheless specified that in order to legitimately activate the relevant termination mechanism, the court must in any event ascertain the existence of a serious breach, constituting just cause.[14]
Cf. The 'minimum turnover' clause in the agency contract.
Following this orientation, the failure to reach the minimum turnover due to covid-19, cannot be considered in itself as a breach such as to legitimise a termination of the relationship due to an act attributable to the agent, with the judge having to assess on a case-by-case basis the actual imputability and culpability of such non-compliance.
3.4. Does the commercial agent retain the right to commission if the customer terminates the contract with the principal because of the coronavirus?
If the customer terminates the contract with the principal because of the coronavirus (e.g. because his shop had to close or his carriers stopped), the question arises whether the commercial agent loses the right to commission under Art. 1748 of the Civil Code.
The current Art. 1748(6) of the Civil Code provides that the agent is obliged to return the commissions collected in the sole event that the contract between the principal and the third party has not been performed for reasons not attributable to the principal (a rule that is, inter alia, mandatory for the parties).
The notion of a cause attributable to the principal has been understood as any intentional or negligent conduct of the principal that resulted in the non-performance of the contract.[15]
Since the customer's breach of contract due to impossibility and/or supervening excessive onerousness of performance (due to the coronavirus) is not a fact attributable to the principal, the agent will not be entitled to receive the commission on such business and will be obliged to return it to the principal if it has already been paid in full or in part.
3.5. The repercussions on severance and termination payments.
As is well known, the parties have the right to terminate the relationship by giving the other party notice. The agent upon termination of the contract is entitled to a severance payment, unless:
- the principal terminates the contract for an act attributable to the agent;
- the agent terminates the contract for an act attributable to the agent.
Taking the above into account, it can be reasonably argued that the arguments made in the previous paragraph "Can the distribution agreement be terminated due to the effects of the Corona pandemic?"may, in principle, also be valid for the agency contract, although one should be aware that it is nevertheless necessary to act with the utmost care and awareness before terminating the contractual relationship, assessing prudently on a case-by-case basis.
One thing, however, is certain, that this pandemic will have a significant effect on the calculations of severance pay and loss of notice for all terminations of contracts that occur close to the arrival of the pandemic.
If those indemnities were to be excessively distorted due to the economic framework connected with covid-19, the question arises whether the agent may supplement them by availing itself of the right guaranteed by Art. 1751(4) of the Civil Code, which grants the agent the right to claim damages in addition to those indemnities.
The prevailing view holds that the damages that the agent may claim in addition to the indemnity are only those from default or tort.[16] It follows that it will be very difficult for the agent to claim further sums beyond those paid to it by way of termination indemnities, given that the decrease in turnover (which led to the decrease in indemnities) is unlikely to be attributable to fault on the part of the principal.
[1] Urgent measures to contain the infection throughout the country.
[2] Limatola, News on agency contracts in April 2020.
[3] Trabucchi, Institutions of Civil Law, § 310, CEDAM.
[4] Torrente - Schlesinger, Handbook of Private Law, §210, Giuffrè Editore.
[5] In that case the debtor's financial difficulties will not be relevant in any event, on this point see Gazzoni, Manuale di diritto privato, Edizioni Scientifiche Italiane.
[6] Cass. Civ. 2016, no. 22626.
[7] On this point, see Vertucci, Non-performance of obligations in the time of the coronavirus: first reflections, ilcaso.it
[8] Vertucci, op. cit.
[9] See Cass. Civ. Cass. of 2013, no. 3710: essentiality is a characteristic that must result either from the express will of the parties or from the nature of the contract.
[10] See on this point Studio Chiomenti, Impact of Covid-19 on contracts.
[11] See on this point Vertucci, op. cit.
[12] Cf. Cass. Civ. 2000, no. 5467.
[13] Cass. Civ. 2011, no. 10934, Cass. Civ. 2012, no. 8295.
[14] Venice, Il recesso, la giusta causa e la clausola risolutiva espressa nel contratto di agenzia, March 2020, La consulenza del lavoro, Eutekne.
[15] Toffoletto, The Agency Contract, Giuffrè.
[16] Bortolotti, Termination Indemnity and Compensation for Further Damage, www.mglobale.it