The law applicable to the international agency contract.
When operating in the field of international contract law, certainly the first aspect to be analysed is to understand by which law the contractual relationship is governed.
As is well known, the regulation of applicable law, in the European context, is dictated by the European Regulation Rome I, No 593/2008 on the law applicable to contractual obligations.
Article 3 of the Regulation gives the parties the freedom to choose to which law to subject the contractual relationship:
"...the choice is express, or clearly follows from the provisions of the contract or the circumstances of the case"
In the event that the parties have not chosen to which jurisdiction the contract shall be subject, the following shall apply Article 4 of the Regulation, which sets out the criteria for identifying the law applicable to the relationship. Specifically, Article 4(1)(B) of the Regulation prescribes that contracts relating to the provision of services, which also includes agency contracts, are governed by the law of the country in which the service provider (the agent, therefore) is habitually resident. This implies that all agency relationships between a foreign principal and an Italian agent, for which the parties have not (expressly) chosen the applicable law, will be governed by the law of the country in which the agent has its habitual domicile, i.e. normally by Italian law.
It can therefore be said that the Italian law is applicable to the international agency contract in the following cases:
- in the case of choice of parts (Art. 3 Rome I Regulation);
- at absence of choice of the parties, in all cases where the agent has its habitual residence on Italian territory (Art. 4 Rome I Regulation);
- in the event that the parties decide to submit the contract to foreign law, the Italian rules shall apply ".internationally imperative"or "necessary application" (Art. 9 Rome I Regulation).
With reference to this last point, which certainly constitutes one of the most complex and critical profiles of international trade law, it is deemed necessary to briefly elaborate.
As is well known the freedom given to the contracting parties to choose how to regulate a contractual relationship encounters limitsIn all legal systems there exist mandatory rules intended precisely to limit the freedom of the parties in order to ensure the observance of certain principles. Applying this principle in the sphere of international contracts is not easy, precisely because one is obliged to deal with the mandatory rules of two or more jurisdictions: the one chosen by the parties and the one which, in the absence of choice, would apply pursuant to Art. 3 of the Rome I Regulation.
How, then, does the right granted to the parties to choose the applicable law fit in with the principle that the mandatory rules applicable in the absence of choice must be respected?
In principle, it may be said that the choice of a particular law entails the total derogation of the rules of a particular legal system (including mandatory rules) in favour of those of another legal system. This implies that, normally, if the parties choose to subject their contract to another legal system, their contract will have to comply with the mandatory rules of that system, but not those of the system derogated from through their choice.
However, it should be noted that, in particular cases, national legislators may decide to attribute to certain standards an even more binding valuesuch as to make them mandatory even at the choice of the parties: these rules are defined as "internationally imperative"or of 'necessary application' and are thus distinguished from those that are 'merely mandatory'.
In the European context, this principle is governed by Article 9 of the Rome I Regulation, which defines the rules of necessary application as:
"... provisions compliance with which is regarded as crucial by a country for the safeguarding of its public interests, such as its political, social or economic organisation, to such an extent as to require their application to all situations falling within their scope, whatever the law applicable to the contract under this Regulation."
The European Court of Justice intervened to interpret the scope of this rule in the Unamar case: in this ruling, the Court stated that the national court may apply the most protective rules of its own law (instead of the law chosen by the parties)
"...only if the court before which the case is brought makes a detailed finding that, in the context of that transposition, the legislature of the State of the forum considered it crucial, within the legal system concerned, to afford commercial agents protection additional to that provided for by that directive, taking account, in that regard, of the nature and purpose of those mandatory provisions.
From this ruling, it follows that in order to prevail over the law of another country based on the same directive, it is not sufficient that the rules chosen provide for a higher level of protection and attribute to them the character of internationally mandatory rules, but that it must also be shown that this choice is of crucial importance for the system in questionin view of the nature and purpose pursued by the rules in question.
The agent's obligation to inform the principal
The duty to provide information is governed by Art. 1746 of the Civil Code. This provision requires the agent to provide the principal with information on market conditions in the assigned area, as well as any other information useful for assessing the convenience of individual business. Specifically, that article provides that the agent shall:
"provide the principal with information regarding market conditions in the area assigned to him, and any other information useful for assessing the suitability of individual deals"
As can be seen, the information requested from the agent can be of two types:
- information concerning the market conditions;
- information needed to assess the convenience of the deal.
The agent, therefore, plays a dual role in the contractual relationship. On the one hand, he has to sound out the development of the area and customers entrusted to him, in order to keep the principal up-to-date on what is actually happening there. On the other hand, he performs the delicate task of scrutinising the suitability of individual deals and the solvency of the customers to whom orders are given.
Not a few problems arise precisely from the interpretation of this article. In particular, it is not easy to understand what are the limits to the principal's right to demand detailed and continuous information from the agent: as a general rule, it is considered that an excessive extension of this obligation could even be considered an indication to question the agent's independence and thus make the relationship qualify as an employment relationship.
That said, with reference to the duty of the agent to inform on the market conditionsit is possible to hold that the principal may require the agent to keep the agent informed, to the extent possible, of everything of which it becomes aware concerning the market situation and its changes in relation to the area assigned to it. This does not implyhowever, an obligation on the agent to make assessments, forecasts or indications as to the future prospects of the market itself. Indeed, the agent is only obliged to report information on potential or actual competitors, which is necessary for the principal to formulate a commercial policy that can be as effective as possible in the area assigned to the agent.
Under the second aspecti.e. the obligation to assess the suitability of the bargain, the agent must assess for each individual bargain (and client) what the contractor's concrete capacity to perform is.
Supplementing the provisions of Article 1746 of the Civil Code, Article 1 of the AEC Industry 2014 and Trade 2009 provides that, unless otherwise agreed,
"The agent shall carry out his activity autonomously and independently [and][...] shall be obliged to keep the principal constantly informed of the situation on the market in which he operates, but shall not be obliged to report at predetermined intervals on the performance of his activities. "
Art. 5 of the AEC Industry and Art. 4 of the AEC Commerce also clarifies that the agent:
"must perform the task entrusted to him in accordance with the instructions given by the company and provide information concerning market conditions in the area assigned to him, as well as any other information useful to the principal in assessing the suitability of individual deals. "
The agent is therefore on the one hand obliged to inform the principal and on the other hand has the right to act in full organisational autonomy: it is therefore necessary to find the right balance between the opposing demands of the agent's organisational autonomy and his obligation to follow instructionsi of the principal.
Therefore, on the one hand, the principal, having to respect the agent's autonomy, may not, for exampleon the one hand, impose on the agent the daily list of customers to be visited and plan the itineraries to be followed by the agent, but on the other hand may ask the agent to visit certain customers or categories of customers it cares about and require the agent to organise the visits in such a way as to adequately cover all customers and to report back to it.
That being said, doctrine and case law hold that the obligation to provide information has no fundamental relevance . In any event, it may in concrete terms be of such relevance as to justify, in the event of a breach, the termination of the relationship due to fault on the part of the agent, if the omissions are likely to cause serious negative consequences for the principal's business performance (Cass. Civ. 1994 No. 7644).
Exclusivity clauses and vertical economic agreements in the European context: e-commerce and territorial exclusivity
Territorial exclusivity clauses, constituting a pactual limitation on free competition, are subject, in addition to Italian law, to the strict European rules on the subject.
In particular, theArticle 101(3) of the Treaty on the Functioning of the EU (TFEU) sets a general ban concerning all agreements and concerted practices of undertakings "chand may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market".
Among prohibited agreements, this provision mentions in particular those aimed at
- directly or indirectly fix the prices of purchase or sale or other terms of transaction;
- limit or controlling productionoutlets, technical development or investment;
- share markets or sources of supply;
- apply, in trade relations with other contractors, dissimilar conditions for equivalent performance;
- make the conclusion of contracts conditional on the acceptance by the other contracting parties of additional benefitswhich, by their nature or according to commercial usage, have no connection with the subject matter of the contracts.
From this framework, European legislation derives specific exceptions which, as far as we are concerned, are set out in the Regulation No 330/2010 (in force since 1 June 2011 replacing the previous Reg. No 2790/1999) concerning so-called 'vertical agreements', i.e. agreements for the distribution and supply of goods or services concluded between undertakings each operating at a different level of the production or distribution chain.
The regulation, in essence, draws the boundaries within which a distribution agreement between undertakings may be exempted from the general prohibition of restrictive business practices and must be interpreted and supplemented in the light of the Commission's Guidelines (LGC), published on 20 April 2010, which among other things expand on the subject of restrictions on e-commerce.
The Regulation No 330/2010 (in force since 1 June 2011 replacing the previous Reg. No 2790/1999) relating to so-called "vertical agreements", i.e. agreements for the distribution and supply of goods or services concluded between undertakings each operating at a different level of the production or distribution chain, essentially draws the boundaries within which a distribution agreement between undertakings may be exempted from the general prohibition of commercial agreements. It must be interpreted and supplemented in the light of the Commission's Guidelines (LGCs), published on 20 April 2010, which, inter alia, expand on the subject of restrictions on e-commerce.
Regarding specifically the Restrictions to share the market by territory group of customers by guaranteeing the exclusive use of certain distributors, they are only allowed when they restrict
i) so-called 'active sales' (defined below) in the exclusive territory or exclusive customers reserved to the supplier or allocated by the supplier to another buyer, but without imposing any limitation on sales by the buyer's customers;
(ii) sales to end users by wholesalers;
(iii) sales by members of a selective distribution system to unauthorised distributors in the territory that the supplier has reserved for that system; and
(iv) the buyer's ability to sell components, supplied for the purposes of incorporation, to customers who would use those components to manufacture goods similar to those produced by the supplier (Article 4 of the Regulation).
In the case before us, the first of the four cited exceptions, which introduces the distinction between so-called 'active' sales e 'passive'allowing territorial restrictions to be negotiated only with regard to the first of the two categories.
According to the Commission Guidelines, the active' sales designate practices of direct solicitation aimed at a specific territory or group of customers through mailings or the use of targeted advertising and promotions; they are defined as 'passive'on the other hand, sales in response to unsolicited orders from individual customers or the use of general advertising and promotions which constitute a reasonable way to reach customers also outside one's own territory (even in territories entrusted to the exclusivity of other distributors), provided that the customers in one's own territory remain the main and sufficient objective to justify the investment (para. 51 LGC).
As for the online salesthe Guidelines specify that they are generally to be regarded as 'passive', with the consequence that, in principle, no distributor may be prevented from using the Internet to sell its products.
In particular, it is made express prohibition to negotiate agreements whereby the distributor agrees to:
(a) redirect consumers to the website of the manufacturer or other distributors with territorial exclusivity;
(b) interrupt consumers' online transactions as a result of ascertaining their geographical area of residence through their credit card data;
(c) limit the proportion of total sales made via the Internet.
(d) pay a higher price for products intended for resale online than for traditional outlets (para. 52 LGC).
Here are some examples of such as contents can validly form the subject matter of vertical agreements:
- the restriction of practices categorised as 'active sales', including, in particular, the electronic commerce,
- the online advertising specifically targeted at certain customers,
- i banner showing a territorial link to third-party Internet sites online,
- the payment of a fee to a search engine or to an online advertising provider to present advertisements specifically directed at users located in a particular territory
- more generally, any effort made to be found specifically in a given territory or by a particular group of customers (para. 53 LGC);
- the publication on the distributor's website of a series of link to the Internet sites of other distributors and/or the supplier;
- the fixation of an absolute minimum quantity (in value or volume) of products to be sold off-line to ensure the efficient operation of its traditional point of sale. This absolute amount of required off-line sales may be the same for all buyers or may be set individually for each buyer on the basis of objective criteria, such as the size of the buyer in the network or its geographic location;
- the setting a fixed fee (i.e. not a variable fee that increases according to the turnover achieved off-line as this would indirectly represent double charging) to support the buyer's off-line or on-line sales efforts;
- the possibility for the supplier to demand compliance with quality standards in connection with the use of Internet sites for the resale of its goods (as it may do in connection with a point of sale or catalogue sale or advertising and promotional activity in general). As regards selective distribution, the supplier may for instance:
- require its distributors to have several 'non-virtual' points of sale or showrooms as a condition for becoming a member of its distribution system (this must not, however, lead to an indirect restriction of online sales),
- agree with their distributors terms and conditions of use of third-party distribution platformse.g. by preventing access to a distributor's site through another site bearing the name or logo of the third party platform (para. 54 LGC).
In conclusion, it can be said that the manufacturer/supplier, once it has authorised a distributor to handle its goods, may not prevent the latter from using e-commerce to sell them also beyond the pre-established boundaries, invading the exclusive territory reserved for other distributors, provided that the end customer's request can be considered as spontaneous and not specifically solicited by the distributor.
On the other hand, limitations aimed at regulating the possibility of the distributor using e-commerce to carry out promotional activities or direct solicitation within an area exclusively entrusted to other purchasers or reserved to the supplier are permissible.
There is also the possibility for the supplier to impose, in any case, on its distributors certain quality standards for the presentation of the products, or specific sales methods consistent with its own distribution system, provided that these conditions do not directly affect the quantity of goods tradable via the Internet or the prices practicable on that platform.
Early termination of an agency contract. How is the indemnity for lack of notice calculated?
The termination of an agency contract is expressly regulated in Art. 1750(2) of the Civil Code. This article grants both parties the right to freely withdraw from the contract for an indefinite period of time, without justification, by giving notice to the other within a specified time limit.
Article 1750(3) of the Civil Code further provides that the "agency contract of indefinite duration may only be terminated by the parties if notice is given, which may not be less than":
- 1 month for the 1st year
- 2 months for the 2nd year
- 3 months for the 3rd year
- 4 months for the 4th year
- 5 months for the 5th year
- 6 months for the 6th and subsequent years.
It is important to remember that the parties may provide for a notice period that is longer, but never shorter, than that dictated by the codified rules.
One wonders, outside the cases where early termination is permissible, what happens when a party terminates the agency agreement without observing notice. In this situation, two types of problems usually arise:
- understand whether the contractual relationship continues or is interrupted;
- understand whether and to what extent the other party will be entitled to the damages.
With regard to the first point, a distinction must be made between fixed-term and open-ended contracts.
With reference to the contract to fixed-termit is common ground that the contract continues to be effective until its expiry. In such a case, an unlawful termination will in no way terminate the contract, which will therefore continue even after the unjustified termination until its normal expiry (cf. Cass. Civ. 1990 no. 1614).
"con an agency contract where the principal unlawfully terminates the relationship and consequently fails to provide the agent with the cooperation indispensable for the performance of its activities, this does not result in the termination of the contract, which is to be regarded as still being in force until the scheduled expiry datebut rather the liability of the principal itself, who is obliged - even in the absence of a default notice - to compensate the agent for the damage."
In such a case, although the contract continues to be effective even after the unjustified termination, it must also be borne in mind that, in principle, it will be almost impossible for the non-terminating party to actually continue the relationship. Precisely on this point, the Supreme Court in the above-mentioned judgment stated that:
"è practically impossible for an agent to continue promoting business where the principal has given notice of termination, albeit unlawful, and has consequently behaved in a manner consistent with that termination by ceasing to provide the agent with the cooperation necessary for the performance of the relationship."
It follows, therefore, that the continuation of the contractual relationship until its natural expiry will in fact entitle the agent to claim damages, to be quantified in the loss of earnings for the remaining duration of the relationship.
With reference to the open-ended contractThe question was posed in different terms before the reform of Art. 1750 of the Civil Code, which was so replaced by Art. 3 of Legislative Decree 10 Sept. 1991, No. 3030, implementing Directive 86/653/EC. With the reform, in fact, the reference in Article 1750 of the Civil Code, which granted the parties the option of replacing notice with the payment of an indemnity, was eliminatedwhich was (and still is) determined by collective economic agreements (see also (cf. calculation of former AEC 2014 allowances, calculation of former AEC 2009 allowances, calculation of ex ANA allowances 2003).
Following this legislative intervention, the majority orientation of the case law and part of the doctrine (Bortolotti), considers that the abrogation of the possibility of the parties to replace the notice with an indemnity, has in fact attributed a 'real effectiveness' to the notice with the consequence of recognising, at least from a theoretical point of view, the right of the non-terminating party to continue the relationship until the expiry of the notice.
The Court of Cassation, on this point, recently reiterated in judgment no. 8295 of 25 May 2012the principle, of the real effectiveness of the notice or of ultrateractivity of the contractual relationship.
"In accordance with the principle of continuation of the relationship during the notice period, the open-ended agency contract does not terminate when one of the parties terminates the contract, but only when the notice period expiresin the interest and for the protection of the non-terminating party."
According to the above case law, giving "real" effect to the notice confers on the non-terminating party the right to continue the relationship until its natural expiry. Although, as noted above, in practice it is difficult to continue a relationship that has been de facto terminated by one of the parties, the parties' right to the continuation of the relationship until its natural expiry translates into the right to claim damages, which, in the case of the agent, may be higher than theallowance for lack of notice (equal to the commissions lost by the agent during the notice period, averaged over the previous year).
The further damage that the agent could claim by way of compensation of damage, may be found, for example, in the case of the sale of seasonal goods. Consider the sale of a seasonal product (e.g. Easter egg, swimming costume, ski-pass, etc.): it is clear that if the termination takes place at the time when the sales season is about to start, the commissions lost by the agent during the notice period will almost certainly be higher than the average of the previous year.
In the case of wrongful termination by the agent, the principalmay, for example, suffer damage resulting from the loss of market sharecaused by the diversion of customers to competitors of the principal.
However, it should be emphasised that according to part of the doctrine (Toffoletto, Baldi-Venezia) and the case law (Civil cassation 1999 No. 5577), in the contract of indefinite duration the notice, contrary, constitutes an obligation of the withdrawing party and is not given 'real' effect. Any breach of that obligation therefore does not affect the validity of the termination, giving rise to only to an obligation to pay damages, corresponding to the indemnity for loss of notice.
While this discussion of the real and obligatory effectiveness of the notice period is still ongoing with regard to the civil law regulation of the agency relationship, as set forth in Article 1750 of the Civil Code, the collective bargaining agreements in force to date, AEC 2009 for trade and AEC 2014 for industry, expressly grant the parties the right to terminate the relationship earlywithout prejudice to the other party's right to severance pay.
Specifically, Article 11 of the AEC 2009 and Article 9 of the AEC 2014 provide that:
"if the withdrawing party at any time wishes to terminate the relationship with immediate effect, it shall pay the other party, in lieu of notice, a sum by way of compensation equal to one-twelfth of the commissions pertaining to the preceding calendar year as many months of notice are due. If the relationship began during the preceding calendar year, the following months of the current year shall be counted towards the twelve-month reference period.
In addition, there is a alternative calculation criterion to the one highlighted above, according to which:
"Where more favourable. the average salary for determining the indemnity in question shall be calculated over the twelve months immediately preceding the notice of termination. Where the relationship has lasted less than twelve months, the said calculation shall be made on the basis of the monthly average of the commissions paid during that relationship."
Therefore, to calculate the amount due as replacement of notice, it will be necessary to perform a double calculationfollowing the two different periods and apply whichever of the two is more favourable to the agent.
Main differences between the agency contract and the commercial distribution contract
The sales dealership contract and the agency contract are among the most common forms of organising distribution. These contracts are united by the fact that both the agent and the dealer undertake the obligation to organise and promote, in an autonomous manner, sales in accordance with the manufacturer's policies, integrating themselves within the manufacturer's distribution network. What mainly differentiates these two intermediaries is the fact that, whereas the agent undertakes, in return for a commission, to promote the conclusion of contracts between the manufacturer and the customers whom the agent has procured, the dealer acts as a buyer-seller and his source of income is based on the difference between the purchase price and the resale price.
The sales concession is a particularly important instrument for the organisation of distribution in markets, both domestic and foreign, which differs from other non-integrated retailers (e.g. 'wholesalers') in that it performs aautonomous promotion and organisation of sales of the grantor's productsin a given territory, which, in principle, is granted to him on an exclusive basis.
A definition of this type of contract is not given by the Civil Codeas it has not been regulated in our legal system and must therefore be qualified as an atypical contract. In any case, if one wants to give a definition of the sales agent, it can be framed as a commercial entrepreneur, who concludes a framework contract with the manufacturer, of fixed or indefinite duration, to regulate, in a given area, all the sales that are carried out on a stable and continuous basis by the grantor to the dealer.
La definition of agent, or rather, of agency contract is, on the other hand, given by the Civil Code, which provides atArticle 1742 of the Civil Code that 'With the agency contract one party undertakes on a permanent basis the task of promoting, on behalf of the other, against remuneration the conclusion of contracts in a specified area' (see also What is the difference between an agency contract and a business intermediary?).
Therefore, while the dealer deals in his own name and on his own behalfby purchasing the goods directly from the grantor and reselling them to third parties, contrary to theagent acts on behalf of and as an autonomous collaborator of the principal, promoting the conclusion of sales contracts to third parties and, only to the extent that he has the power of representation, also in the name of the principal.
Thus, although the agent and the dealer perform a very similar function, in that both are in charge of organising the distribution of a principal's products, in a given territory entrusted to them, as autonomous entrepreneurs, but integrated into the manufacturer's sales network, at the same time, they distinguish in a very pronounced way, in the way they manage sales the agent is purely and simply an intermediary of the principal, the dealer, on the other hand, buys the products directly from the licensor and is himself responsible for reselling them directly to the end customer, who has been procured by him.
Looking at the two figures from a strategic point of view, it can be seen that thecommercial agent allows the principal to have stronger and more direct control over customersas the sale is made by the principal itself and the agent is instead responsible for passing the order on to the principal, the dealer has instead the task of organising the sales phase to the end customer and, often, also the service phase, and therefore normally has more direct control over the customerIt also performs activities related to the promotion of the sale, such as customs clearance of goods, shipment to the consignee and warehousing.
These types of contracts also differ in terms of the commercial risks that the manufacturer assumes: in the distribution the risk is definitely shifted more to the dealer, who bears the potential danger of not being able to resell the purchased products. On the contrary in the case of agencythe risk of non-performance by the end customer, falls directly back on the principal, especially if the parties have applied Italian law, since in our legal system the usability of the so-called ''default clause'' is limited.star of belief"has in fact been deleted. It is briefly recalled that with such a clause, the agent assumes in part or in full, the risk of non-payment by a third party introduced by it, undertaking to reimburse the principal, within the agreed limits, for the loss incurred by the latter.
It should be noted, however, that in most sales distribution contracts there is a clause, which postpones the dealer's obligation to pay for the goods, only after payment of the product by the end customer. It is evident that such an agreement will greatly shift the entrepreneurial risk towards the grantor.
Certainly, one aspect that strongly distinguishes the two contracts is theseverance pay (on this subject see also calculation of indemnity pursuant to art. 1751 of the civil code., calculation of former AEC 2014 allowances calculation of former AEC 2009 allowances e calculation of ex ANA allowances 2003). As is well known, the agency contract expressly provides, in Article 1751 of the Civil Code, for the agent's right to receive, under certain conditions, an indemnity following the termination of the contractual relationship. Likewise cannot be said for the sales concession contract. Italian jurisprudence, in fact, differs from the jurisprudence of several European countries - e.g. Austria and Germany) does not recognise this right to the concessionaire.
Authoritative doctrine dissociates itself from this jurisprudential orientation, stating that "even in the absence of legislative provisions, the right to an indemnity in an agency contract in which the agent is also authorised to make purchases on its own account as a dealer could be extended to the business carried on by the dealer. Indeed, it seems to us that in such cases, since it is a mixed contract, in which the cause of the agency contract prevails, the indemnity for termination, by virtue of the principle of absorption, could be extended to the business carried on by the agent as dealer"(Venice-Baldi).
Notice of Defect and Statute of Limitations in the International Sale of Immovable Property. What does the Vienna Convention provide for?
In the European context, the law applicable to the contract of sale of movable goods is governed by Article 4 of the Regulation EC593/2008which provides that in the event of a lack of choice of the parties, "a contract for the sale of goods is governed by the law of the country in which the seller has his habitual residence."
In the event that the relationship is governed by Italian law, one must certainly be aware that, implicitly, the Vienna Convention 1980 on the International Sale of Goods.
Having said that, this article will briefly analyse two aspects of great practical and legal relevance, i.e. understanding how the time limit for reporting defects and the time limit for bringing an action are regulated when the Vienna Convention applies to the contractual relationship.
(a) Complaint of Defect
This term is governed by Art. 39.1 of the Convention, which provides:
"the buyer forfeits the right to rely on a lack of conformity if he does not report it to the seller, stating the nature of the lack of conformity, within a reasonable timefrom the time when it was ascertained or should have been ascertained."
The problem of quantification of the 'reasonable period', should be regulated on the basis of general principles of international law, taking into account the decisions of the Courts of the who have joined the Vienna Convention and the type of goods sold. This principle was expressed in Article 7.1 of the Convention, which provides that:
"for the purpose of interpreting this Convention, it shall be in view of its international character and the need to promote theuniformity of its applicationand to ensure respect for good faith in international trade."
If one looks in the European context "reasonable time limit" is normally understood as a period of approximately 20-30 days. (see Oberlandesgericht Stuttgart, 21.8.1995, Oberlandesgericht Köln 21.8.1997, Obergericht Luzern 7.1.1997, Cour d'Appel Grenoble 13.7.1995).
In any event, should the dispute be heard by an Italian court, it is noted that the Italian courts would have to take into account European rulings on the interpretation of the Vienna Convention, are not bound to them and may have a tendency to interpret this term using the parameters of Italian law.
As is well known, in this regard, Article 1495 of the Civil Code provides that:
"the buyer forfeits the right to the guarantee if he does not report the defects to the seller within eight days of their discovery, unless the parties or the law stipulate otherwise."
First, it must be specified that it is common ground in doctrine and jurisprudence that the eight-day time limit applies not only in the case of a warranty claim but also in the case of an action for damages. Moreover, the eight-day period runs from the delivery of the goods to the purchaser or, in the case of hidden defects, from the discovery of the defect.
That considered, according to some (but rare) Italian judgmentsthe reasonable deadline for the complaint is around 20-30 days (Court Vigevano 12.7.2000; F. Ferrari, Giur. It. 2001, 2) and this term was even extended to 4 months (Court of Bolzano, 27.1.2009)
In any case, it should be borne in mind that the Court of Cassation has not yet ruled on the point, and therefore it is prudently recommended, in order to be sure that the complaint was indeed timely, to first check whether it was made within 8 days of the discovery of the defect.
(b) Prescription
A second aspect, of no small importance, concerns the limitation period.
In this regard, it should be noted that the Vienna Convention does not expressly provide for a limitation periodbut only a time limit for reporting, which may not exceed two years. Article 39.2 provides that:
"in all cases, the purchaser forfeits the right to rely on a lack of conformity if he does not report it within a period of two years, starting from the date on which the goods were actually delivered to him, unless this deadline is incompatible with the duration of a contractual guarantee."
Since the issue of prescription is not dealt with in the Convention, it will be necessary to ascertain what Italian law provides in this respect. In this regard, Article 7.2 of the Convention provides that:
"questions concerning matters governed by this Convention and not expressly settled by it shall be governed in accordance with the general principles by which it is inspired, or, in the absence of such principles, in accordance with the law applicable under the rules of private international law."
The statute of limitations, in the context of contracts of sale, is regulated in Italian law in Art. 1495 of the Civil Code:
"the action is, in any event, time-barred within one year from delivery; but the buyer, who is sued for performance of the contract, may always enforce the warranty, provided the defect in the thing is notified within eight days of discovery and before the expiry of one year from delivery. "
One wonders whether such term of one year, can be coordinated with the two-year term provided for in Art. 39.2 of the Convention for reporting defects. Here, too, there are differing opinions.
In the aforementioned judgment, the Court of Bolzano considered that the term of two years in Article 39(2) of the Convention is incompatible with the provision for a limitation period shorter than one year in Article 1495(3). According to the Court of Bolzano, therefore, the time limit under Article 1495 para. 3 should be extended from one year to two years.
According to authoritative doctrine (A. Reinstadler; F. Ferrari) and the jurisprudence of the European Courts (Oberster Gerichtshof - Österreich, - 25.6.1998) the gaps in the agreement must be filled according to the law applicable to the contract, even if it provides for a term of less than two years.
Therefore, even on this point, Italian jurisprudence and doctrine are not in agreement and it is deemed advisable, as a matter of prudence, to check whether the one-year limitation period, pursuant to Article 1495 of the Civil Code, has been observed.
The agent's right to commissions on direct, indirect and area business.
Article 1748 of the Civil Code provides that the agent's right to commission exists essentially in three cases: for directly promoted business by the agent; for business concluded by the principal without the agent's intervention with previously procured customers by the agent ('subsequent business") and business concluded directly by the principal without the intervention of the agent with customers belonging to a restricted area or clientele to the agent.
As is well known, the agent's remuneration consists of a commission, which normally consists of a percentage of the amount of the business concluded by the principal with its customer through the agent's intermediation. Before proceeding to identify for which business the commission is actually due, it is worth recalling that the parties are free to contractually determine the manner in which the agent's remuneration is to be calculated,[1] through, for example, the payment of:
- a surchargei.e. the percentage related to the full or partial difference between the list price and the higher selling price;
- a fixed-sum remuneration for each contract concluded, irrespective of its amount; or
- remuneration through a guaranteed fixedoften combined with a variable commission remuneration. (It is important to remember that if the remuneration is determined solely in a fixed form, this may be an element that, combined with other indications of subordination, may lead to the relationship being qualified as one of employment).[2]
That said, the agent's right to commissions is governed by Art. 1748 of the Civil Code, which provides as follows:
"For all business concluded during the contract the agent is entitled to commission when the transaction has been concluded as a result of its intervention.
The commission is also due for business concluded by the principal with third parties that the agent had previously acquired as customers for business of the same type or
belonging to the area or category or group of customers reserved for the agent, unless otherwise agreed."
The agent's commission is thus due in essentially three cases:
- for the directly promoted business by the agent;
- for business concluded by the principal, without the intervention of the agent with previously procured customers by the agent ('subsequent business");
- business concluded directly from the principal without intervention of the agent with customers belonging to a restricted area or clientele to the agent (so-called '.direct business").
The three 'categories' of commissions listed above are briefly analysed below.
1. Business promoted directly by the agent.
Article 7(1)(a) of the Directive 86/653/EEC states the following:
"for a commercial transaction concluded during the agency contract, the commercial agent is entitled to commission: a) when the transaction has been concluded thanks to his intervention [...]".
Principle that was fully transposed into our legal system with Art. 3 of the legislative decree 65/99which amended Article 1748 of the Civil Code.
Bearing in mind that the legislation makes the agent's entitlement to commission conditional upon his actual intervention in the conclusion of the deal, it is essential to understand when a deal can be said to be actually concluded thanks to the agent's intervention. While there are no doubts in the case where the agent directly collects the order from the customer and transmits it to the principal, it will certainly be less clear when the initial contact activity carried out by the agent is followed by a negotiation conducted by the principal or another agent.[3]
On the other hand, it is not necessary to verify the agent's intervention in the conclusion of the bargain if he is reserved a zone and the business is concluded in the exclusive territory of the agent; in such a case, the agent will in any event be paid a commission, unless the parties have contractually agreed to exclude the right to commission on the business directly carried out by the principal (a matter that will be dealt with in the following paragraph 3).
Still different is the case of the area agent who has promoted business with customers from outside their territory. According to authoritative doctrine,[4] in which case the agent would not accrue any commission since the business is outside the scope of the agency contract. According to this guideline, the agent would only accrue commission if it appears that the parties have agreed - expressly or tacitly - to bring the business under the contract, otherwise, i.e. if it is not sufficiently clear that the agent's activity is to be regarded as promotion under the contract, the agent would not accrue commission.
The 2014 AEC Industry (Art. 6) and the 2009 AEC Commerce (Art. 5) regulate the still different circumstance where the promotion and execution of a deal involves areas and/or customers entrusted exclusively to different agents. In that case, the AEC provide that, unless otherwise agreed
"the relevant commission shall be paid to the agent, who has actually promoted the business, unless otherwise agreed between the parties for an equitable sharing of the commission. "
Finally, it should be borne in mind that Art. 1748(1) does not determine the time at which the right to commission is acquired, a problem that is addressed in Art. 1748(4) below.
- Read also: When is the principal obliged to pay commission?
2. Business concluded directly by the principal, with customers procured by the agent.
The second case is the one introduced by Art. 7(1)(b) of the directive, which provides that the agent is entitled to commission:
" when the transaction was concluded with a third party whom he had previously acquired as a customer for transactions of the same kind."
Our legal system has incorporated this provision in Art. 1748 para. 2 of the Civil Code; according to this provision, the non-exclusive agent, once he has placed an order with the principal for a customer he has acquired, is thus also entitled to commission for business that the principal subsequently concludes, provided that it is of the same type.
The purpose of the rule is to protect relationships with non-exclusive agents, who are only entitled to remuneration for the business they promote, and thus to prevent the principal from circumventing the (non-exclusive) agent's right to remuneration by simply contacting the clients acquired by the agent directly for subsequent business.
To understand what is meant by business of the 'same kind'a 2016 Court of Justice ruling can come to the rescue,[5] that (although it deals with the different question of the qualification of 'new client' for the purposes of quantifying the severance payment)[6]It held that even those with whom the principal already had business relations concerning the same types of goods (in this case sunglasses) but of different brands could be considered new customers if the sale of the new brands to customers already acquired by the principal required the establishment of specific business relations.
Looking at this ruling from a different perspective (i.e. from the principal's side) and applying it to the regulation of commissions (and not severance pay) one could affirm that the (non-exclusive) agent may not accrue any commission on business concluded by the principal with customers that the agent had previously procured, not only if it concerns products belonging to a different product sector, but even of the same type, but of a different brand, if the principal proves that such sales activity was the consequence of active commercial activity.
3. Direct business within the agent's area or with its exclusive customers.
In the event that the agent is granted a zonethe agent has pursuant to Art. 1748 (2) of the Civil Code a right to commission on business concluded by the principal with third parties within its territory, regardless of the place of execution of the deal.
This principle was also enshrined in Article 5(6) of theAEC 20 June 1956 for agents of industrial companies, effective erga omneswhich provided for the area agent's right to commission on business concluded directly by the principal, without requiring that performance must take place in the area.
Given that in our legal system the agent's exclusivity constitutes under Art. 1743 of the Civil Code a natural element of the contract and that it is therefore presumed to exist in the contractual relationship, the agent's entitlement to commissions on the principal's direct business always exists, unless otherwise agreed by the parties. According to doctrine and jurisprudence, in the event of a waiver of exclusivity by the parties, the right to commission on direct business will automatically cease to exist, since, in such a case, the "area or [...] category of customers reserved for the agent"as provided for in Article 1748 of the Civil Code.[7]
Lastly, it should be noted that the parties may nevertheless expressly stipulate a agreement by which they exclude the right to commission on direct businesseven if exclusivity is retained for the agent, in such a case, the agent will only be entitled to commission on business that it has personally promoted (point 1) and on 'subsequent' business (point 2).
Less settled is the question whether the commission for business is due to the agent in the area where the customer then actually sends the goods for resale (sales outlets). In the absence of an agreement, if contracts are concluded at the customer's place of business and it is then the latter that distributes the goods to its branches/stores, it is thought to be preferable that the agent be paid commission where the customer is located, irrelevant being where the contract is then performed.[8]
A different question is whether the agent may claim the right to commission on sales that the customer (gorssista) makes to the public in the agent's area, through its outlets. Italian jurisprudence[9] and the Court of Justice,[10] inclines to exclude the agent's right to receive commissions for such sales, given that Article 1748(2) of the Civil Code presupposes that such sales are concluded by a person, i.e. the principal, in an immediate relationship with the purchaser, i.e. in which the exchange of consideration takes place immediately and directly between the two parties, without the intervention of intermediaries and without further intermediate steps.
[1] Our legislation does not give a definition of commission, but the European directive does. 86/653/EEC which states in Article 6§2 as follows: "All elements of remuneration that vary according to the number or value of business shall be deemed to constitute commission for the purposes of this Directive. "
[2] See Cass. Civ. 2012 no. 12776; Cass. Civ. 2009 no. 9686; Cass. Civ. 1998, no. 1737.
[3] Bortolotti, Distribution Contracts, 2016, p. 266, Wolters Kluver.
[4] Ibid.
[5] Court of Justice 7 April 2016, No. C-315/2014, Marchon v. Karaszhiewicz.
[6] Quagliarella, New clients in the agency contract: recent Community case law.
[7] See Venezia, Il contratto di agenzia, 2014, Giuffré.
[8] Ibid, p. 275.
[9] Cass. Civ. 2001 No. 11197, (in the case in point, the Court of Cassation annulled the judgment on the merits that had recognised the commission in relation to sales made by a wholesaler, who had purchased the products marketed by the principal and had subsequently placed them on retail sale through its own salespersons).
[10] Judgment of 17 January 2008, No. 19/17, with a note by Venezia, Il necessario intervento del preponente per il diritto dell'agente alla provigione per l'affare concluso da un terzo, in Contracts 2008, p. 307 et seq.
The 'minimum turnover' clause in the agency contract
One of the most frequently used and widely used clauses in agency contracts is certainly the 'minimum turnover' clause. With this clause, the parties establish the minimum annual turnover threshold that the agent must contribute to the principal.
In this regard, the question arises as to the validity of this clause and the consequences if the agent fails to meet the agreed thresholds.
Firstly, on a preliminary basis, so to speak, according to case law, the agreed turnover must be fairSecondly, it is noted that a clause granting the principal the power to unilaterally modify the minimum turnover figures during the course of the relationship is of doubtful validity: as a matter of principle, the parties cannot always and indiscriminately introduce contractual clauses conferring on one party the power to modify the contract in a discretionary manner, especially if they concern fundamental elements of the relationship, such as, for example, the zonethe agent's customer package, the commissionscontractual minimums, etc..
According to settled case-law, this power vested in the principal is, in principle, also subject to the general principles of our legal system of fairness and good faith in the performance of the contractual relationship, governed precisely by Articles 1175, 1375 and 1749 of the Civil Code.[1] In general, in an agency contract, the assignment to the principal of the power to modify essential elements of the relationship must "be justified by the need to better adapt the relationship to the needs of the parties as they have changed over time"[2] e not may result in a substantial circumvention of contractual obligations.
That said, in principle, case law holds that the failure to reach an agreed minimum implies a de facto default of the agent. The biggest problem is to understand whether this constitutes a breach of such gravity as to justify termination by the principal.
In the event that the parties had not foreseen anything in this regard, it will be necessary to assess, on a case-by-case basis, the seriousness of this breach and whether it could constitute a termination for just cause or termination of the contract.
If, on the contrary, the parties had expressly provided in the contract that failure to reach the minimums would result in the immediate termination of the relationship and, therefore, had provided for a express termination clause under Article 1456 of the Civil Code, it must be held that until a few years ago case law unequivocally held that:
"when [...] the parties, in their autonomy and freedom of bargaining, have previously assessed the significance of a specific non-performance, implying that the non-performance is of retermination of the contract without notice, the court may not make any enquiry into the extent of the non-performance itself in relation to the interest of the other contracting partybut must only accept whether it is attributable to the obligor at least by reason of fault, which is presumed under Art. 1218 of the Civil Code.".[3]
This jurisprudential direction has been radically changed by a more recent (and now consolidated) orientation of the Court in 2011,[4] in which the Court of Cassation, although on the one hand recognised the legitimacy of inserting an express termination clause in the contract, on the other hand partially limited its effectiveness: in this ruling, the Court specified that the termination of an agency contract by virtue of an express termination clause entails the preliminary and necessary verification by the court of the existence of a breach. The judge, specifically, will have to verify whether:
- the breach is of such gravity as to exclude theallowance for lack of notice pursuant to Article 1750 of the Civil Code;
- the breach is of such gravity as to exclude the agent's right to receive theseverance pay pursuant to Article 1751 of the Civil Code.
These are briefly analysed below.
(a) Indemnity for lack of notice
It is well established that the agency contract is subject to aanalogous application of Art. 2119 of the Civil Code., which provides for the right of the parties to terminate without notice in the event of a cause that does not permit the continuation, even provisional, of the relationship.
On the basis of this assumption, the aforementioned case law has therefore held that in the event of recourse by the principal to an express termination clause, the latter may be considered valid to the extent that it justifies a termination in the first place, since the freedom of the parties cannot in fact be absolute. The judge, in such cases, will have to ascertain whether the failure to achieve the budget is a "cause that does not permit the continuation, even temporarily, of the relationship'..[5]
Applying this principle to the minimum turnover clause, the case law on the merits has recently held that in itself the failure to achieve the budget of sale does not legitimise an immediate termination of the relationship by the principal,
"because [...] it is not one of the agent's obligations to cause the principal to achieve a certain turnover and because it is not possible, in principle, to charge the agent for the failure to achieve objectives, irrespective of whether or not that failure is attributable to the agent's defaulting behaviour.[6]
b) Severance pay
Similarly, as far as theseverance pay, the assessment of the gravity of the breach must be made on the basis of the standard set forth in Article 1751 of the Civil Code, which also makes the termination of this indemnity conditional upon the occurrence of a breach which, because of its seriousness "does not permit the continuation, even temporarily, of the relationship."
Since Art. 1751 of the Civil Code expressly provides that all the provisions contained therein are mandatory to the detriment of the agent, the possibility of excluding the agent's right to the termination indemnity shall be subject to the existence of a serious breach, irrespective of the insertion within the contract of an express termination clause.[7]
It follows that the non-achievement of the objectives, if it is unrelated to precise and specific failures of the agent that must be specifically proved by the principal, cannot be used as a ground for the breach of the fiduciary relationship such as to prevent the continuation of the relationship.[8]
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[1] On this point cf. Cass. Civ. No. 9924, 2009.
[2] Cass. Civ. no. 5467, no. 2000.
[5] Cass. Civ. 14.2.2011 no. 3595.
[6] Brescia Court of Appeal of 15.9.2019.
[7] Cf. on this point Court of Modena 10 June 2011.
[8] Id. Brescia Court of Appeal of 15.9.2019.
The non-compete obligation in the agency contract: during and after termination of the relationship.
In the European context, it is certainly surprising that the 86/653/EEC makes no mention whatsoever of the agent's obligation not to compete with the principal during the course of the contractual relationship.
This approach has led most of the Member Countries not to mention, regulatively and expressly, this institution in their legal systems. Therefore, in the European context absolutely not to be taken for granted that the agent, in the absence of a special agreement between the parties, is obliged not to work for competitors of the principal during the contractual relationship.
In contrast, under Italian law during the course of the relationship, the prohibition of competition is "natural effect of the contract"This, even though there is no specific rule providing for it, such as, for example, Art. 2015 of the Civil Code for employees, is indirectly inferred from para. 1 of Art. 1746 of the Civil Code, according to which the agent must protect the interests of the principal and act loyally and good faith.
As for the period following the termination of the contract, i.e. the so-called prohibition of 'post-contractual' competition, it was partly regulated by the directive, which dictated the minimum protections to be respected by all signatory countries. They are:
- to be stipulated for registered;
- concerning the sector geographical area or group of persons and the geographical sector entrusted to the commercial agent, as well as the goods for which the commercial agent had representation under the contract, and thecommercial agent had representation under the terms of the contract.
- which is of a duration not exceeding two years from the contractual relationship
The directive has therefore provided that the post-contractual non-compete agreement is permissible only by specific agreement of the parties and in any event within certain legal limits. Indeed, an obligation of that nature, which certainly has the utility of ensuring that the principal can maintain the clientele that was managed by the agent prior to the termination of the relationship, nevertheless has the side effect of actually making it impossible for the agent to carry on its business and for that reason has been expressly limited by the European directive, so as to guarantee the interests of both parties.
The prohibition of 'post-contractual' competition was introduced in our country of Article 1751encore c.c., by Decree 303 of 1991. Specifically, the first paragraph of Article 1751encore provides that:
"An agreement restricting competition by the agent after termination of the contract shall be in writing. It must concern the same area, customers and kind of goods or services for which the agency contract was concluded and its duration may not exceed two years after the termination of the contract."
The second paragraph of Article 1751encore c.c., was inserted by Law No. 422 of 2000, and states that:
"acceptance of the non-competition agreement entails, upon termination of the relationship, the payment to the commercial agent of an indemnity of a non-commission nature. The indemnity shall be commensurate with the duration, not exceeding two years after the termination of the contract, the nature of the agency contract and the severance payment."
It is important to emphasise that the latter article applies only to certain categories of agents of commerce, which were considered more deserving of protection. Article 23.2 of the aforementioned Law No 422 of 2000, which introduced precisely the second paragraph of Article 1751encore c.c., expressly provided that the article applies:
"exclusively to agents practising in the form of sole proprietorships, partnerships or single-member corporations, as well as, where provided for by national economic agreements in the sector, to corporations consisting exclusively or predominantly of commercial agents. The provisions of paragraph 1 shall take effect on 1 June 2001."
Therefore, the post-contractual non-compete agreement has, in the first place, onerous charactersecondly, it must relate to the same area, clientele and type of goods or services for which the agency contract was concluded (Trib. Florence 20 November 2012) and, in addition, must assume the written form ad substantiam (Trib. Milan 12 September 2011).
As for the quantificationan indemnity of a non-commissionable nature is provided for the agententrusted to negotiation between the partiestaking into account the National Economic Agreements of the category.
In the absence of individual agreementand only when AECs are not applicable, Art. 1751encore third paragraph, provides that the indemnity shall be determined by the court in equity, with reference:
- the average of the fees collected by the agent during the term of the contract and their impact on the total turnover over the same period;
- the causes of termination of the agency contract;
- to the size of the area assigned to the agent;
- the existence or non-existence of exclusivity for a single principal.
ABSTRACT
- under Italian law during the course of the relationship, the non-competition clause is a 'natural effect of the contract'
- the prohibition of 'post-contractual' competition was introduced in our country in Art. 1751encore c.c.. It must relate to the same area, clientele and type of goods or services for which the agency contract was concluded, its duration may not exceed two years following the termination of the contract and it must be concluded in writing
- acceptance of the covenant not to compete entails, upon termination of the relationship, the payment to the commercial agent of an indemnity of a non-commission nature
- an indemnity of a non-commissionable nature is envisaged for the agent, entrusted to negotiation between the parties, taking into account the National Economic Agreements for the category
- in the absence of an individual agreement, and only when the ERM is not applicable, Art. 1751encore third paragraph, provides that the indemnity shall be determined by the court on an equitable basis
Area exclusivity in the agency contract.
While the exclusive right is a 'natural' element of the agency contract, it is not an 'essential' element, the contracting parties may derogate from this right, or contractually delimit its exact extent.
In Italian law, the agent's exclusivity constitutes a natural element of the contract: Article 1743 of the Civil Code, in fact, provides that "the principal may not use several agents at the same time in the same area and for the same branch of activity". This implies that, unless otherwise agreed by the parties, it is presumed to exist in the contractual relationship.
That said, it is noted that, although the issue of agent 'exclusivity' is of fundamental importance, the Community legislator in the dir. 86/653/ECC limited itself to partially regulating this institution, i.e. only with specific reference to the agent's commission (cf. Art. 7 Dir. 86/653/EEC).
It follows that, contrary to Italian law, the opposite principle applies in most European countries, i.e. that, in the absence of an agreement between the parties, the agent will not benefit from area exclusivity (cf. area agent, in German law).
Therefore, while in the European context (in principle), it is considered that zone exclusivity must be expressly agreed upon, in Italy the exclusive is regarded as a natural feature of the contract and, therefore, present in every relationship, unless the parties have stipulated otherwise (see also Agent and/or Area Manager? A brief overview.)
With regard to function, zone exclusivity evidently pursues the in order to protect the agent and his earnings prospects. Indeed, if the principal could use several agents in the same area, the agents would see their profit prospects significantly reduced: the agents would be in competition with each other and the commissions due for business concluded by one of them could not be paid to the others.
That being said, it should certainly be borne in mind that, while Art. 1743 of the Civil Code is intended to protect the agent from any direct actions of the principal in its area, theArt. 1748(2) of the Civil Code provides that the agent is entitled to commissions also on business concluded with customers ".belonging to the area or category or group of customers reserved for the agent". According to this rule, it is apparently assumed, unless otherwise agreed, that the principal is free to make all types of sales even in the areas that have been granted to the agent on an exclusive basis.
Italian jurisprudence, in an attempt to overcome this apparent contradiction, has expressed itself several times, asserting that the principal's right, under Art. 1748.2 of the Civil Code, to make direct sales also in the agent's territory, must be partially limited, since this right may be exercised only on an occasional basis and it must be ruled out that the principal may carry out a systematic and organised sales activities in the agent's exclusive area. It is stated, for example, in a recent Supreme Court ruling that:
"in the agency relationship, the proposer may not operate, on a continuous basis, in the agent's area of competence but, pursuant to Article 1748(2) of the Civil Code, has only the power to conclude, directly, individual deals, even if of significant size, the performance of which gives rise to the agent's right to receive the so-called indirect commissions, has only the power to conclude, directly, individual deals, even if of significant size, the performance of which gives rise to the agent's right to receive the so-called indirect commissions; it follows that, where the proposer's intervention is merely isolated, the right to the payment of the commission is, in turn, episodic and not periodical, 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).
It must also be said that it is such systematic conduct is unlikely to be found in practiceas the principal tends to have no interest in selling directly if he then has to pay commission to the agent anyway. The manufacturer, in other words, would perform the same work as the agent in its stead, bear the agent's costs, without making a profit, and in any event have to pay commission to an inert agent. On the other hand, it is more likely that the principal, who on the basis of a reassessment of market conditions deems it preferable to sell directly to the end customer without using the agent any longer, would simply terminate the agency contract.
Nevertheless, it is nevertheless clear that this approach, according to which, in the absence of an agreement to the contrary, the principal must limit his activity in the agent's territory to occasional business, can give several practical problemsrelated precisely to interpreting the distinction, which is far from clear, between occasional, and therefore legitimate, breaches from continuing breaches of exclusivity.
In this regard, a orientation of authoritative doctrine (Bortolotti)According to which it is preferable to construe the exclusivity of Art. 1743 of the Civil Code as meaning that the principal is free to make as many direct sales in the agent's exclusive area as it wishes, provided that it pays the indirect commission, and that there is therefore a violation of the exclusivity only when the principal appoints other agents in the area or tries to circumvent the exclusivity by fictitiously interposing third parties in order not to pay the indirect commission.
In any event, provided that the exclusive right is a 'natural' element of the agency contract, it is not an 'essential' element, the contracting parties may derogate from this right, or contractually delimit its exact extent.
On the basis of the above, it is advisable, in order to avoid any uncertainty and reduce potential disputes to a minimum, to contractually clarify how and to what extent the principal may carry out direct sales in the territory and what the consequences are in the event of individual or repeated breaches of contract.