Can the parties request witness evidence of the existence of an agency contract?
What happens if the parties do not conclude the agency agreement in writing, but only on the basis of verbal agreements? Can the parties prove the existence of the relationship by means of witnesses?
With reference to these aspects, the second paragraph of Article 1742 of the Civil Code provides that "the contract must be proven in writing. Each party shall be entitled to obtain from the other a document signed by it reproducing the contents of the contract and of the additional terms".
The Court recently ruled on the interpretation of this rule, consolidating what is the orientation of case law, according to which the agency contract cannot be proved by witnesses, but only in writingexcept to prove the blameless loss of the document (Cass. Civ. no. 16/03/2015, no. 5165) (cf. also What is the difference between an agency contract and a business intermediary? e Main differences between the agency contract and the commercial distribution contract).
Although at first glance this judgment does not seem to add much to what is already set forth in Article 1742 of the Civil Code, a closer reading of the regulatory text reveals that this article may give rise to conflicting interpretations and generate rather significant problems. Specifically, this rule, on the one hand, imposes on the parties the burden of proving the agency contract in writing, implicitly excluding evidence by witnesses, but, on the other hand, attributes to them the unwaivable right to demand a written document from each other incorporating the content of their verbal agreement.
It is clear that the coordination between the requirement of the written form and the right of the parties to obtain a document reproducing the content of the agreement contains inconsistencies within it: think of the (rather frequent) case where the parties have entered into an agency agreement verbally and, in the course of the relationship, the principal refuses to provide the agent with a written document reproducing its contents.
In such a case, may the agent, who is granted an unwaivable right to have the verbal agreement set out in a written document, take legal action to obtain such a document and, in order to prove the existence of the contractual relationship, request evidence by witnesses?
To answer this question, it is necessary to take a small step back and analyse the origin of the current wording of the regulatory text. Article 1742 of the Civil Code was thus amended by Legislative Decree No 303 of 10 September 1991, which expressly transposed European Directive 86/653on the coordination of the laws of the Member States relating to self-employed commercial agents.
The directive, specifically, introduced two fundamental concepts, namely:
- to give each party the right to request and obtain from the other a signed document reproducing the contents of the agency agreement (Art. 13(1));
- to allow Member States, if they so wish, to "provide that an agency contract shall only be valid if evidenced in writing." (Art. 13, §2)
In introducing these general principles, the directive was inspired by the German model, which at the § 85HGB (Handelsgesetzbuch - Commercial Code), explicitly provides (and provided) for the right of each party to "demand that both the content of the contract and subsequent agreements relating to it be included in a document signed by the other party. "
It is necessary to specify that such a document drawn up by only one party would not constitute a real contract, but rather a unilateral declaration by which one party indicates what it considers to be the content of the contract. (see Bortolotti, Contract Handbook of International Commercial Law)
Therefore, according to the legal text, the parties, who have not entered into a contract in writing, cannot prove in court, by means of witnesses, the contractual relationship and any changes to that relationship (e.g. increases in commissions, expansion of the area) that were agreed upon between the parties orally. To the contrary, will only be able to prove whether there are 'written traces' proving the actual agreement of the parties, such as exchanges of e-mails and correspondence, order confirmations from which the actual existence of such changes can be presumed, etc.
In any event, as noted above, the (unwaivable!) possibility of the party requesting to be provided with a written document reproducing the content of the contract is expressly provided for. But what happens if the other party refusesor does not recognise that verbal agreements existed between them. In such a case, could the requesting party take legal action to have the existence of the relationship recognised and use witnesses to do so?
On the basis of the foregoing, this question no longer seems to be a foregone conclusion, and the interpretation of the Supreme Court, examined above, according to which "the agency contract must be proven in writing, pursuant to Article 1742(2) of the Civil Code, as amended by Legislative Decree No. 303 of 10 September 1991, so that testimonial evidence (except to prove the irresponsible loss of the document) and evidence by presumptions is inadmissible", may not be agreeable in part.
According to authoritative doctrine (Bortolotti), the party's unwaivable right to be able to obtain a written document reproducing the content of the contract, is not compatible with a restrictive interpretation of the rule, which would prohibit the possibility of using witness evidence to obtain such a written document.
If one were to follow this interpretationnot only very authoritative, but also highly consistent with the practical needs of the parties and the practice of business relations, the party wishing to obtain from the other party a written document reproducing the existing verbal agreements may use testimonial evidence in the proceedings aimed at obtaining the written document from the other party. After obtaining such a document, the party may assert its rights in the course of any dispute.
This orientation is mainly based on the fact that, the choice of the legislator to introduce the requirement of the written form is incompatible with the (inalienable) right of the parties to have the verbal agreement incorporated in writing.
If this were not done, one would find oneself in the paradoxical situationof the party to be able to exercise its unwaivable right. The purpose of the rule is to enable a party to obtain a written document that facilitates the protection of its rights and, therefore, to require written proof of the herbal agreements that a party requests to be formalised would constitute a paradox, which would therefore render the rule under scrutiny completely ineffective.
The 'star of belief' in the agency contract.
The so-called 'star of the believer' clause[1] can be defined as a genuine guarantee, whereby a party 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 suffered by the latter.[2]
In matters of agency, the usability of such a clause is in fact which disappeared as a result of the reform of Law No 256 of 21 December 1999, by which Article 1746 of the Civil Code was amended. It is recalled that with the reform, a third paragraph in Art. 1746 of the Civil Code.. This paragraph introduced an explicit prohibition to include in agency contracts a clause that
"places liability, even if only partial, on the agent for the third party's non-performance".
However, the rule expressly provides for the parties' right to derogate from this prohibition, but only
"for individual transactions of a particular nature and amount, individually determined".
The guarantee in such cases, however, will meet the quantitative limitation imposed by the same paragraph 3 of Art. 1746 of the Civil Code, as it may not exceed the commission that the agent would be entitled to receive in respect of the same business.
In scope Europeanit is noted that, despite its relevance and the critical issues associated with it, the Directive No. 86/653 EECneglected to regulate this institution, which was (and still is) regulated in the remaining member states mainly in the following two ways:
- the parties can only agree on the star del credere for certain affairs or customers, but, in such cases, the agent guarantees to 100% the principal's risk (a mechanism followed, for example, by Germany, Finland and Portugal);
- there is a generic warranty obligation charged to the agent on all business promoted by the agent, but of much lower amount to the actual damage suffered by the principal (e.g. Belgium and the Netherlands).
Prior to the 1999 reform, Italy also fell within the second category: the agent's "star del credere" was not specifically regulated in the civil code, but was regulated as a contingent and pactual institution by the Collective Economic Agreements. The agent was bound to the "star del credere" exclusively by covenant and in compliance with the rules of the Collective Economic Agreements having effect erga omnes (art. 7, b.e.c. 20 June 1956) according to which the agreed charge to be borne by the agent could not exceed 20% of the loss suffered by the principal, a figure reduced by the collective economic agreements valid as a private agreement (9 June 1988, trade sector and 16 November 1988, industry sector) to 15%.
The Court of Cassation recently ruled on a case brought by an agent seeking payment of the agreed-upon star del credere fee in a contractual relationship established prior to the reform of Article 1746(3), which took place at the end of 1999.[3]
In that judgment, the Court makes a brief analysis of the development of the institution, recalling that it, already provided for in the Commercial Code, found its way into the Civil Code at 'Article 1736 of the Civil Code, concerning commission contracts. Art. 1736 of the Civil Code, in fact, provides that the commission agent is liable to the principal for the performance of the bargain, having at the same time a right to special remuneration or a higher commission. In this perspective, the commission agent, as agent of the principal, on whose behalf it acts, acts as guarantor to the principal of the solvency of the third party.
The Court, in essence, reconfirmed the orientation expressed and reaffirmed by the prevailing jurisprudence of legitimacy,[4] according to which the agency contract (before the reformArticle 1736 of the Civil Code on the subject of contracts of commission could not be applied by analogy, since the agent's liability for star del credere was specifically governed by Art.collective economic agreement 20 June 1956made compulsory erga omnes by Presidential Decree No. 1450/1961 (limiting the agent's liability without further compensation to 20% of the loss suffered by the principal), or by the more favourable rules set forth in subsequent collective agreements in the sector (where the parties have adhered thereto), which adopt the narrower limit of 15%.[5] Based on this reasoning, the Court stated that:
"in the absence of an explicit agreement on remuneration and in the absence of evidence of a will of the parties in that sense, no additional remuneration is due to the agent for the adjudication of the star del credere."
A as a result of this regulatory intervention, (after 1999) the usability of the star del credere is in fact much less relevant in our system. The parties may, in fact, only agree on this on a case-by-case basis and, moreover, the agent's guarantee must be limited to an amount equal to and not exceeding its commission.
In practice, the legislature has applied and imposed the requirements (examined above) of both systems used by the Member States and has restricted the usability of this institution in such a way as to effectively remove it from our legal system.
On the one hand the star of believing, so disciplined, no longer has the function of guaranteeing the principal for certain business that it considers to be risky (the guarantee is not 100%, but is only equal to the commission that the agent would be entitled to receive for that particular business), on the other hand cannot be used to empower the agentin that it cannot operate with respect to all business promoted by the agent, but only in individual cases where the principal has a suspicion that the customer is untrustworthy.
This choice in fact constitutes a serious disadvantage for the Italian principal wishing to enter new markets and submit its law to foreign agents. Indeed, the star del credere should be seen as a protection for the principal, especially when the principal deals with agents in foreign markets, for which the star del credere should be a highly necessary means, considering the greater difficulty for the principal to obtain information on the reliability and solvency of foreign clients, procured by the agent.
____________________________
[1] The term 'star del credere' is regulated in Article 1736 of the Civil Code, on the subject of commission, which provides: "A commission agent who, by agreement or custom, is obliged to "star del credere" is liable to the principal for the performance of the bargain. In such a case, he shall be entitled, in addition to the commission, to a fee or a higher commission, which, in the absence of an agreement, shall be determined according to the custom of the place where the business is transacted. In the absence of usage, the court shall decide according to equity." Through this clause, the commissioner assumes the role of a guarantor under Art. 1936 of the third party with whom it contracts, guaranteeing the principal the regular performance of the third party's obligation and the successful completion of the transaction.
[2] See Bortolotti, Distribution Contracts, 2016, Wolters Kluwer, p. 241.
[3] Cass. Civ. 2015, no. 4461.
[4] See, e.g., Court of Cass. Civ. no. 1999, no. 12879.
[5] Cass. Civ. 1999, no. 3902/99
The power of the principal to change the client portfolio of his agent
[:en]With Judgment of 2 July 2015, No 13580the Court of Cassation has ruled on a point that is very often the subject of dispute in contractual relations between agent and principal. The case was as follows: a principal, who had been assigned the power to change the customer portfolio of its agent during the course of the contractual relationship, used this clause, in order to effect a drastic reduction in the agent's customer portfolio of 88% (on this point see also Unilateral changes to the agency contract by the principal).
The Court, which was questioned on the legitimacy of such conduct, noted that although the principal is generically given the power to reduce the customer base of its agent, this power should, however, be exercised primarily for the purpose of adjusting the contract to the actual evolution of the relationship over time. Moreover, again according to the Supreme Court, this power must in any event be subject to limits and be exercised by the holder with fairness and good faith.
The appeal was essentially based on the allegation of breach and/or misapplication, by the principal, of theArticle 2 A.E.C. 2002 (collective economic agreements) and Article 2697 of the Civil Code. Paragraphs 3, 4 and 5 (relevant here) of Article 2 A.E.C. 2002 read as follows:
"Zone variations (territory, clientele, products) and the amount of commissions, except in minor cases (meaning reductions of up to five per cent of the value of the commissions accruing to the agent or representative in the calendar year preceding the variation, or in the twelve months preceding the variation if the preceding year has not been worked in full), may be implemented upon written notice to the agent or representative to be given at least two months in advance (or four months in advance in the case of agents and representatives engaged in business exclusively for one company), unless the parties agree in writing to a different commencement date.
If these changes are of such a magnitude as to appreciably alter the economic content of the relationship (appreciable variation being understood as reductions greater than twenty per cent of the value of the commissions accruing to the agent in the calendar year preceding the variation, or in the twelve months preceding the variation if the preceding year was not worked in full), the written notice shall not be less than that provided for the termination of the relationship.
If the agent or representative communicates, within 30 days, not to accept changes that significantly alter the economic content of the relationship, the communication of the principal shall constitute notice of termination of the relationship of agency or representation, at the initiative of the principal".
It follows from reading this article, therefore, that the principal is conferred a potestative right, consisting in the possibility of decreasing his agent's clientele. In that case, if the agent communicates that it does not accept the decreases imposed on it by the principal, a just cause for terminationwhich allows the principal to terminate the contractual relationship without having to pay the agent the termination indemnity pursuant to Article 1751 of the Civil Code.
However, this potestative right is, according to settled case law, also subject to the general principles of our legal system, of fairness and good faithin the performance of the contractual relationship, governed precisely by Articles 1175, 1375 and 1749 of the Civil Code (cf. Cass. no. 9924/09).
Moreover, the Court itself referred to a guideline of its own (cf. Cass. 5467/2000), according to which, in general, in an agency contract, the granting to the principal of the power to amend certain clauses (in particular those relating to the territorial scope and the amount of the commission) should 'be justified by the need to better adapt the relationship to the needs of the parties as they have changed over time'.
The use of potestative powers, therefore, must not, however, result in a substantial circumvention of contractual obligations and must therefore be limited and subject to the principles of fairness and good faith.
The Court concluded, stating that in the present case, the principal essentially used and disguised its own potentative rightthe purpose of reducing, precisely, the clientele of its agent, in order to put the latter in a de facto situation impossible to accept and, therefore, with the purpose and function of having the contractual relationship terminated, without the obligation to pay the indemnity in lieu of notice arising.
Finally, it is recalled that the Court has already referred numerous times to the principle of acting in good faith pursuant to Article 1375 of the Civil Code. On other occasions it has, for example, considered contrary to this principle the conduct of the principal who had made a radical change in pricing policyso as to make it effectively impossible for the agent to operate (cf. Cass. Civ. 1995 No. 1142), the refusal unconditionally and systematically of make garlic course orders transmitted by the agent (Court of Cass. Civ. 1985 No. 6475), replace the agent during the notice period, at the same time informing the customers (Cass. Civ. 1991 No. 1032).[:de]With Judgment of 2 July 2015, No 13580the Court of Cassation has ruled on a point that is very often the subject of dispute in contractual relations between agent and principal. The case was as follows: a principal, who had been assigned the power to change the customer portfolio of its agent during the course of the contractual relationship, used this clause in order to make a drastic reduction in the agent's customer portfolio, amounting to 88%.
The Court, which was questioned on the legitimacy of such conduct, noted that although the principal is generically given the power to reduce the customer base of its agent, this power should, however, be exercised primarily for the purpose of adjusting the contract to the actual evolution of the relationship over time. Moreover, again according to the Supreme Court, this power must in any event be subject to limits and be exercised by the holder with fairness and good faith.
The appeal was essentially based on the allegation of breach and/or misapplication, by the principal, of theArticle 2 A.E.C. 2002 (collective economic agreements) and Article 2697 of the Civil Code. Paragraphs 3, 4 and 5 (relevant here) of Article 2 A.E.C. 2002 read as follows:
"Zone variations (territory, clientele, products) and the amount of commissions, except in minor cases (meaning reductions of up to five per cent of the value of the commissions accruing to the agent or representative in the calendar year preceding the variation, or in the twelve months preceding the variation if the preceding year has not been worked in full), may be implemented upon written notice to the agent or representative to be given at least two months in advance (or four months in advance in the case of agents and representatives engaged in business exclusively for one company), unless the parties agree in writing to a different commencement date.
If these changes are of such a magnitude as to appreciably alter the economic content of the relationship (appreciable variation being understood as reductions greater than twenty per cent of the value of the commissions accruing to the agent in the calendar year preceding the variation, or in the twelve months preceding the variation if the preceding year was not worked in full), the written notice shall not be less than that provided for the termination of the relationship.
If the agent or representative communicates, within 30 days, not to accept changes that significantly alter the economic content of the relationship, the communication of the principal shall constitute notice of termination of the relationship of agency or representation, at the initiative of the principal".
It follows from reading this article, therefore, that the principal is conferred a potestative right, consisting in the possibility of decreasing his agent's clientele. In that case, if the agent communicates that it does not accept the decreases imposed on it by the principal, a just cause for terminationwhich allows the principal to terminate the contractual relationship without having to pay the agent the termination indemnity pursuant to Article 1751 of the Civil Code.
However, this potestative right is, according to settled case law, also subject to the general principles of our legal system, of fairness and good faithin the performance of the contractual relationship, governed precisely by Articles 1175, 1375 and 1749 of the Civil Code (see Court of Cassation No. 9924/09).
Moreover, the same Court referred to its own orientation (see Court of Cassation 5467/2000), according to which, in general, in an agency contract, the granting to the principal of the power to amend certain clauses (in particular those relating to the territorial scope and the amount of the commission), should "be justified by the need to better adapt the relationship to the needs of the parties, as they have changed in the course of time".
The use of potestative powers, therefore, must not, however, result in a substantial circumvention of contractual obligations and must therefore be limited and subject to the principles of fairness and good faith.
The Court concluded, stating that in the present case, the principal essentially used and disguised its own potentative rightthe purpose of reducing, precisely, the clientele of its agent, in order to put the latter in a de facto situation impossible to accept and, therefore, with the purpose and function of having the contractual relationship terminated, without the obligation to pay the indemnity in lieu of notice arising.
Finally, it is recalled that the Court has already referred numerous times to the principle of acting in good faith pursuant to Article 1375 of the Civil Code. On other occasions it has, for example, considered contrary to this principle the conduct of the principal who had made a radical change in pricing policyso as to make it effectively impossible for the agent to operate (cf. Cass. Civ. 1995 No. 1142), the refusal unconditionally and systematically of make garlic course orders transmitted by the agent (Civil Cass. 1985 No. 6475), replace the agent during the notice period, at the same time informing the customers (Civil Cass. 1991 No. 1032).[:en]With Judgment of 2 July 2015, No 13580the Court of Cassation has ruled on a point that is very often the subject of dispute in contractual relations between agent and principal. The case was as follows: a principal, who had been assigned the power to change the customer portfolio of its agent during the course of the contractual relationship, used this clause in order to make a drastic reduction in the agent's customer portfolio, amounting to 88%.
The Court, which was questioned on the legitimacy of such conduct, noted that although the principal is generically given the power to reduce the customer base of its agent, this power should, however, be exercised primarily for the purpose of adjusting the contract to the actual evolution of the relationship over time. Moreover, again according to the Supreme Court, this power must in any event be subject to limits and be exercised by the holder with fairness and good faith.
The appeal was essentially based on the allegation of breach and/or misapplication, by the principal, of theArticle 2 A.E.C. 2002 (collective economic agreements) and Article 2697 of the Civil Code. Paragraphs 3, 4 and 5 (relevant here) of Article 2 A.E.C. 2002 read as follows:
"Zone variations (territory, clientele, products) and the amount of commissions, except in minor cases (meaning reductions of up to five per cent of the value of the commissions accruing to the agent or representative in the calendar year preceding the variation, or in the twelve months preceding the variation if the preceding year has not been worked in full), may be implemented upon written notice to the agent or representative to be given at least two months in advance (or four months in advance in the case of agents and representatives engaged in business exclusively for one company), unless the parties agree in writing to a different commencement date.
If these changes are of such a magnitude as to appreciably alter the economic content of the relationship (appreciable variation being understood as reductions greater than twenty per cent of the value of the commissions accruing to the agent in the calendar year preceding the variation, or in the twelve months preceding the variation if the preceding year was not worked in full), the written notice shall not be less than that provided for the termination of the relationship.
If the agent or representative communicates, within 30 days, not to accept changes that significantly alter the economic content of the relationship, the communication of the principal shall constitute notice of termination of the relationship of agency or representation, at the initiative of the principal".
It follows from reading this article, therefore, that the principal is conferred a potestative right, consisting in the possibility of decreasing his agent's clientele. In that case, if the agent communicates that it does not accept the decreases imposed on it by the principal, a just cause for terminationwhich allows the principal to terminate the contractual relationship without having to pay the agent the termination indemnity pursuant to Article 1751 of the Civil Code.
However, this potestative right is, according to settled case law, also subject to the general principles of our legal system, of fairness and good faithin the performance of the contractual relationship, governed precisely by Articles 1175, 1375 and 1749 of the Civil Code (see Court of Cassation No. 9924/09).
Moreover, the same Court referred to its own orientation (see Court of Cassation 5467/2000), according to which, in general, in an agency contract, the granting to the principal of the power to amend certain clauses (in particular those relating to the territorial scope and the amount of the commission), should "be justified by the need to better adapt the relationship to the needs of the parties, as they have changed in the course of time".
The use of potestative powers, therefore, must not, however, result in a substantial circumvention of contractual obligations and must therefore be limited and subject to the principles of fairness and good faith.
The Court concluded, stating that in the present case, the principal essentially used and disguised its own potentative rightthe purpose of reducing, precisely, the clientele of its agent, in order to put the latter in a de facto situation impossible to accept and, therefore, with the purpose and function of having the contractual relationship terminated, without the obligation to pay the indemnity in lieu of notice arising.
Finally, it is recalled that the Court has already referred numerous times to the principle of acting in good faith pursuant to Article 1375 of the Civil Code. On other occasions it has, for example, considered contrary to this principle the conduct of the principal who had made a radical change in pricing policyso as to make it effectively impossible for the agent to operate (cf. Cass. Civ. 1995 No. 1142), the refusal unconditionally and systematically of make garlic course orders transmitted by the agent (Civil Cass. 1985 No. 6475), replace the agent during the notice period, at the same time informing the customers (Civil Cass. 1991 No. 1032).[:]
Derogation of the agent's notice period.
Article 1750 of the Civil Code, as replaced by Article 3 of Legislative Decree No 303 of 10 September 1991 (implementing the Community Directive 86/653), states that:
"If the agency contract is a indefiniteeither party may terminate the contract by giving notice to the other within a fixed period of time (para. 2).
"The notice period may in no case be less than to one month for the first year of the contract, to two months for the second year commenced, to three months for the third year commenced, to four months for the fourth year, to five months for the fifth year and to six months for the sixth year and all subsequent years (para. 3).
"The parties may agree on longer notice periods, but the principal may not observe a shorter time limit to that imposed on the agent"(para. 4).
It should be recalled that the amendments made to Article 1750 of the Civil Code by Legislative Decree No 303 of 1991 were implemented in line with Community Directive No 653 of 1986, which expressly provided that:
1. If the agency agreement is concluded for an indefinite period, either party may terminate it by notice.
2. The notice period is one month for the first year of the agency agreement, two months for the second year commenced, three months for the third year commenced and for subsequent years. The parties may not agree on shorter terms.
3. Member States may fix the notice period at four months for the fourth year, five months for the fifth year and six months for the sixth and all subsequent years. They may provide that the parties may not agree on shorter periods.
The question has been raised as to whether the parties may derogate in part from the normative dictate of Article 1750 of the Civil Code.., reducing the notice periods set by the legislature. Specifically, it has been argued that the protection expressly provided for by the directives is referable only to the first three years and that therefore it would be permissible to argue that the term of notice mandatory by the parties would be referable only to the three months. If this theory were followed, the parties could partially derogate from Art. 1750 of the Civil Code and provide for a notice period of three months also for relationships lasting more than three years.
The Court of Cassation has ruled on this issue, rejecting this argument in its entiretyarguing that "in the matter of agency contracts of indefinite duration, the term of notice, pursuant to Article 1750 of the Civil Code (as replaced by Article 3 of Legislative Decree No 303 of 10 September 1991), cannot be less than one month for each year, or fraction thereof, of the duration of the contract up to a maximum of six months, since the Italian legislature - as permitted by Article 15 of EEC Council Directive No 86/653/EEC of 18 December 1986, without prejudice to the mandatory protection for the first three years - has provided for increasing terms of four, five, and six months for the years following the third year. 15 of EEC Council Directive 86/653/EEC of 18 December 1986, without prejudice to the mandatory protection for the first three-year period, the Italian legislature - as allowed by Article 15 of the EEC Council Directive 86/653/EEC of 18 December 1986, without prejudice to the mandatory protection for the first three-year period - has provided, also for the years following the third year, increasing terms of four, five and six months (respectively for the fourth, fifth, sixth and subsequent years) which cannot be derogated by the parties." (Cass. Civ. No. 16487, 2014)
Therefore, according to the Court, the notice period in Art. 1750 of the Civil Code is not binding on the parties, or rather, the parties may only provide for terms that are longer, but not shorter, than those indicated in the code.
Lastly, I recall that failure to give notice entitles the agent to demand theallowance in lieu of notice.
Main obligations of the agent. Is a simple propaganda activity sufficient?
According to Art. 1742 of the Civil Code, the agent in the contractual relationship "undertakes on a permanent basis to promote, on behalf of the other, against remuneration the conclusion of contracts in a specified area." (cf. obligations of the agent under German law)
With reference to this article, the Court of Cassation recently pronounced a judgment that focused precisely on the essential elements of the agency contract. The Court specified that the activity of promoting the conclusion of contracts, which precisely constitutes the typical obligation of the agent pursuant to Article 1742 of the Civil Code, cannot consist in a simple activity of '....propaganda"even if this results in an increase in sales; in fact, a mere activity of promoting the conclusion of contracts is not sufficient to accrue the agent's entitlement to commission, as it is it is necessary for the agent himself to carry out an activity of convincing the potential customer to place orders for the principal's products. Only in that case, i.e. if the promoted contract is successful due to the agent's activity, will the agent be entitled to the commission. (see also Unilateral changes to the agency contract by the principal. e The agent's obligation to inform the principal).
The Supreme Court has stated on this point that the agent's performance consists of
"at acts of varied and non-predetermined content - such as advertising, preparing contracts, receiving and forwarding proposals to the principal for acceptance - acts all of which tend to promote the conclusion of contracts in a particular area on behalf of the principalnone of these activities constitutes an indispensable component of the agent's performance." (Cass. Civ. 4.9.2014 no. 18690).
Case law, therefore, makes a clear distinction between propaganda and promotional activity.
The activity of promotion, in fact, is considered to be the typical performance of the commercial agent, pursuant to Article 1742 of the Civil Code. Promoting the conclusion of a contract therefore means pushing, proposing, implementing a series of activities so that certain contracts are concluded in a given area. Promotional activities, it should be noted, include several impulse' activities and 'facilitation', aimed precisely at the placement of a good or service in a given area, designed to increase or support towards purchase the demand for the product offered by the principal.
These impulse activities include (mainly) propaganda, which is designed to persuade and inform a potential customer of the existence of the product or service, illustrating its qualities and characteristics.
In any event, mere propaganda activity is not sufficient for an agency relationship to be deemed to exist. Lastly, I note that case law does not exclude the possibility of making the action of propaganda pre-eminent over that of preparing and arranging the contract.
The termination clause for just cause in the agency contract. Valuation parameters.
On the subject of the termination of the employment relationship, Article 2119 of the Civil Code provides that "either party may terminate the contract before the end of the term, if the contract is a fixed-term contract, or without notice, if the contract is of indefinite duration, if a cause arises that does not permit the continuation, even temporarily, of the relationship."
Case law, now rather uniformly, considers Article 2119 of the Civil Code is applicable by analogy. also to the agency relationship. Therefore, also in this context, the obligation of the terminator of an open-ended contract to give notice does not exist if there is a (just) cause that does not permit the continuation of the relationship, even temporarily (Cass. Civ. 14.2.2011 no. 3595).
Moreover, according to case law and authoritative doctrine, in such cases the principal's obligation to pay the agent would cease to exist. indemnity in lieu of notice which was not given, given the termination of the relationship for reasons attributable to the agent himself.
Given that the analogical applicability of Art. 2119 para. 1 of the Civil Code to the agency relationship is rather unquestionable, the question arises as to when a just cause for termination of the contract can be said to exist for the principal.
The Supreme Court of Cassation has ruled on this issue stating that '.the institution of termination for just cause, provided for by Article 2119, paragraph 1, of the Civil Code in relation to the employment contract, is also applicable to the agency contract, taking into account, however, for the assessment of the seriousness of the conduct, that in the latter context the relationship of trust - in correspondence with the greater autonomy of management of the activity in terms of places, times, methods and means, in accordance with the achievement of the business purposes - assumes greater intensity compared to the employment relationship. It follows that, for the purposes of the lawfulness of the termination, a fact of minor importance is sufficient, according to an assessment entrusted to the judge of the merits which cannot be challenged in a court of law, if adequately and correctly motivated. (In the present case, the Court held that the existence of just cause for the agent's termination had been correctly established, due to the non-payment of commissions relating to a specific order, received directly from the principal, but from third parties falling within the agent's exclusive area and which the latter had previously acquired as customers)." (Cass. Civ. 5.11.2013 no. 24776).
The indemnity in lieu of notice in an agency agreement.
In Italian law, the duration and termination modalities of the agency contract are regulated by Article 1750 of the civil code.
The first paragraph of this article states that 'the fixed-term agency contract which continues to be performed by the parties even after the expiry of the term is transformed into a contract of indefinite duration."
Para. (2) of Art. 1750 of the Civil Code regulates the minimum notice to be given by the parties in the event of termination. Specifically, it provides that: the "open-ended agency contract may be terminated by the parties only 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.
Importantly, the parties may provide for a longer notice period, but never inferior to that dictated by the codified rules.
The question arises, therefore, what happens if the notice period is not observed: does the principal owe the agent an indemnity for the notice period not observed?
Example:
Agent X has worked for principal Y for 6 years. Principal Y decides that it does not want to continue working with the agent, a decision supported by mere personal reasons and without the existence of just cause. It terminates the contract without notice and pays the commissions due up to the date of termination.
The lawyer of principal Y, upon learning of the incident, contacted the principal advising him that, on the basis of settled case law, in the event of a principal's failure to give notice of termination the agent is nevertheless entitled to receive a indemnity in lieu of said notice (in this case 6 months) to be calculated on the average of the commissions accrued in the year prior to termination[1].
It may be concluded that where a party terminates, without there being a reason sufficient to justify such a choice, it is obliged to compensate the other party for the damage.
In the event of termination by the principal, such damage shall, in principle, correspond to the commissions that the agent allegedly received in the remaining period of the relationship. [2]
It is disputed whether such indemnity in lieu of notice is due only in the case of (unjustified) termination by the principal or also in the case of termination for just cause by the agent. According to the prevailing case law, it is held that the agent should also be entitled to the indemnity in lieu of notice in this case. [3]in addition to any damages[4].
Moreover, the case law holds that the agent's termination for just cause is converted, where it is established that there is no just cause and unless a different intention on the part of the agent emerges, into a termination without notice, with the consequent right of the principal to receive the indemnity for lack of notice.[5]
Finally, according to authoritative doctrine (Bortolotti) and case law,[6] It would seem that the right of the party affected by the termination cannot be excluded a priori to claim 'full' damages if it proves that the damages amount to a sum greater than the severance pay.
However, it is important to emphasise that the indemnity in lieu of notice is mandatory and cannot be excluded either by collective or individual agreements.[2]
ABSTRACT
- a fixed-term contract that is continued to be performed following its expiry turns into an open-ended contract
- the parties may provide for a notice period longer, but never shorter than that provided for by law
- if terminated without notice, an indemnity in lieu of such notice is nevertheless provided for, to be calculated on the average of the commissions accrued in the year prior to termination
- it is held that even if the termination for just cause is effected by the principal, the latter shall be entitled to the indemnity for lack of notice
- it would seem that the right of the party affected by the termination cannot be excluded a priori to claim 'full' damages if it proves that the damages amount to a sum greater than the notice payment
[1] see e.g. Cass. Civ. 21 December 2010, no. 25902
[2] Civil Cassation, 15 June 1994, No 5795
[3] Civil Cassation, 18 March 1993, No 3211
[4] Civil Cassation, 9 April 1992, No 4337
[5] Cass. civ. Sec. II Sent., 30 September 2016, no. 19579
[:de]Art. 1750 of the Civil Code regulates the duration of the agency contract and its termination.
The first paragraph provides that 'the fixed-term agency contract which continues to be performed by the parties even after the expiry of the term is transformed into a contract of indefinite duration."
The second paragraph of Article 1750 of the Civil Code further provides that the "open-ended agency contract may be terminated by the parties only 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
The parties may provide for a notice period that is longer, but never shorter, than that dictated by the codified rules.
The question arises, therefore, what happens if the notice period is not observed: does the offeror owe the agent an indemnity for the notice period not observed?
E.g. Agent X has worked for 6 years for proponent Y. Proposer Y decides it does not want to continue working with the agent, a decision supported by mere and simple personal reasons and without the existence of a just cause. It terminates the contract without notice and pays the commissions due up to the date of termination.
The lawyer of offeror Y, having become aware of the event, contacts the principal advising him that, according to settled case law, in the event of failure to give notice of termination by the principal, the agent is in any event entitled to receive an indemnity in lieu of such notice (in this case 6 months) to be calculated on the average commissions accrued in the year preceding the termination[1].
It is important to stress that the indemnity in lieu of notice is mandatory and cannot be excluded either by collective or individual agreements.[2]
ABSTRACT
- a fixed-term contract that is continued to be performed following its expiry turns into a contract of indefinite duration;
- the parties may provide for a notice period longer, but never shorter than that provided for by law;
- if terminated without notice, an indemnity in lieu of such notice is nevertheless provided for, to be calculated on the average of the commissions accrued in the year prior to termination
[1] see e.g. Cass. Civ. 21 December 2010, no. 25902
[:en]Article 1750 of the Italian Civil Code governs the duration of the agency agreement and its termination.
The first paragraph provides that "the agency agreement for a fixed-term contract, which continues to be performed by the parties even after the expiry of the term turns into an open-ended contract.
The second paragraph of art. 1750 cc, it also provides that the 'agency agreement for an indefinite period may be terminated by the parties only if it is given notice, which may not be less than'.
- 1 month for the 1 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 year and for subsequent years
The parties may stipulate a longer period of notice, but not shorter than that dictated by above mentioned terms.
One wonders, therefore, what happens if the notice period is not met: the principal must pay to the agent compensation for the notice period is not respected?
For example: The agent Caio has worked for six years for the principal Tizio. Tizio chooses not to continue working with the agent, a decision supported by mere and simple personal reasons and without the existence of a just cause. He terminates the contract without notice and pays the commission due to the date of recission.
The lawyer of Tizio, aware of what happened contacts the principal warning him that, based on a constant Italian case-law, in the event the principal teminates the contract without notice the agent is still entitled to receive the payment of the notice period (in this case six months) to be calculated on the average of commissions earned in the year prior to the termination.
Important! The compensation in lieu of notice is mandatory and can not be excluded nor by collective bargaining or individual contracts.
IN SUMMARY
the fixed-term contract which is continued to be performed after its expiry turns into permanent contracts;
the parties may provide for a notice period higher, but never lower than that provided by law;
in case of termination without notice and cause, the agent has right to a compensation in lieu of notice, to be calculated on the average of commissions earned in the year prior to withdrawal[:]
Defamation on the Internet in Germany and Italy. Comparing legal systems
Some time ago I addressed the issue, now of general interest, of the legal consequences in the case of defamation via the Internet.
I would like to briefly recall that the Court of Livorno recently ruled on this point, giving rise to a new orientation jurisprudential. The Court decided the conviction of a woman for "defamation", with the aggravating circumstance ".print media"for insulting his former employer on his Facebook profile.
On this issue, the Court of German Supreme Courtwhich stated in a recent judgment of 17.12.2013 that a violation of a person's rights through an internet publication has the same value as a press violation.
According to the judges of Karlsruheviolation of a person's right is also considered to be violated if a person puts harmful material on the Internet and that material is then disseminated by third parties.
The comparison of the two rights does not have a purely theoretical value, but a strongly practical one. Consider the example where:
an Italian puts material on the net that infringes the rights of a German citizen resident in Germany. The question arises as to whether the latter has the right to sue the Italian in a German court and request the application of German law to resolve the dispute.
Regarding jurisdiction, i.e. which court is competent to decide on the case, one is reminded of the ruling of the Court of Justice of 25.10.2012 by which it granted the aggrieved party the possibility of bringing an action before the court where it has its centre of interests.
As regards the applicable law, however, the general principle of the Rome II Regulation on the law applicable to non-contractual obligations, which in Article 4 provides that it is applicable the law 'of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur."
In the present case, therefore, a German citizen whose personal rights have been violated by a publication put online by an Italian citizen, resident in Italy, could potentially sue the latter in Germany, requesting the application of German law.
Cabotage in Europe and necessary documentation
The Community licence also allows, pursuant to Articles 8 and 9 of the Regulation (EC) No 1072/2009the activity of road haulage cabotage, i.e. the provision of services of carriage of goods by road for hire or reward within the borders of a Member State other than that in which the Community undertaking is established.
Cabotage differs from international intra-community transport in that it takes place entirely within the borders of a single Member State (other than that of establishment).
a) Limitations on cabotage activity
Road freight cabotage is only permitted on a temporary basis and remains subject to various quantitative restrictions
- The first limitation stems from the need for the presence of the vehicle within the host Member State to be justified on the basis of a previous international transport.
- The other (quantitative) limits differ depending on whether the host Member State is that of the destination of the previous international transport or is a different State.
- In the first case, para. I of Art. 8.2 of the Regulation (EC) No 1072/2009 limits the overall duration of the cabotage activity to a maximum of seven days since the last discharge relating to international transport and sets a limit of three permitted operations in that time frame.
- In the second case, para. II provides that asingle operation within three days of entry of the empty vehicle in the territory of the host Member State, without prejudice to the possibility of carrying out two further operations in different Member States, and always within a maximum period of seven days from the last unloading relating to the international transport.
(b) documentation to be kept on board
Compliance with these quantitative limits must be rigorously documented. In Italy, annotations are no longer required to be made in a special report book. However, Ministerial Decree 03.04.2009, in accordance with Art. 8.3 of the Regulation (EC) No 1072/2009, continues to require the possession of documentation attesting to the incoming international carriage and showing, for each cabotage operation, at least:
- the sender's name, address and signature;
- the name, address and signature of the transporter;
- the name and address of the consignee as well as his signature and the date of delivery once the goods have been delivered;
- the place and date of acceptance of the goods and the expected place of delivery;
- the description of the goods and their packaging in common terminology and, in the case of dangerous goods, the generally recognised designation, as well as the number of packages, special marks and numbers on them;
- the gross weight or quantity, otherwise expressed, of the goods;
- the registration number of the motor vehicle and trailer.
The above-mentioned quantitative limitations and the related documentation obligation are waived if the cabotage activity is carried out in thecombined (intermodal) goods transport. Wishing to encourage intermodal transport as a possible remedy to the problems of road traffic congestion, environmental protection and traffic safety, European legislation has freed combined goods transport from any quantitative restrictions.
c) Combined goods transport
EEC directive no. 92/106, transposed in Italy by Ministerial Decree of 15.02.2001, derogates by virtue of the criterion of speciality from the general regulations on road haulage cabotage, removing all the quantitative limitations provided for by EC regulation no. 1072/2009 and by Ministerial Decree of 03.04.2009, provided that certain prerequisites for applicability are met. A fundamental prerequisite is, firstly, the combination of the mode of transport by land with rail and/or sea or by inland waterway. Secondly, the transported container must be twenty feet or more. Further prerequisites differ depending on whether the transport is combined ship-road or rail-road respectively:
- at combined road-ship transport, the stretch by ship must be at least 100 km as the crow flies, while the stretch by road must be at most 150 km as the crow flies between the point of beginning or end of the journey by road and the port.
- at combined rail-road transportthe rail route must be at least 100 km as the crow flies, while the road route must be the shortest distance between the place where the road journey begins or ends and the nearest appropriate railway station.
As far as combined rail-road transport is concerned, the term "appropriate railway station" Article 1 of Directive 92/106/EEC is applicable only to multimodal railway stations which, having regard to the circumstances of the case, are actually suitable as starting or finishing points for the rail journey. The conditions for the application of the special rules are therefore also fulfilled if there are other railway stations closer to the starting or finishing point of the road journey, but they are not actually functional for intermodal transport.
It is worth noting that It is up to the haulier to prove recurrence of the prerequisites for the applicability of the special rules on the combined transport of goods: in the absence thereof, the quantitative limitations for road cabotage and the related documentation obligation remain in place.
lawyer Luca Andretto
collaborator at Studio Dindo, Zorzi & Associates
Documentation to be kept on board in the carriage of goods by road in Italy by foreign companies
The transport of goods by road for third parties on Italian territory may also be carried out by haulage companies established abroad, provided it is in the context of international transport. It may also be transport entirely within Italian borders (cabotage), but in that case strict limits must be respected.
Let us examine below the authorisations and other documents that the haulier must keep on board the vehicle and present at the request of Italian control officers, as well as the sanctions he may incur if he fails to do so.
(a) The Community Licence
The Regulation (EC) No 1072/2009 (which from 04.12.2011 replaces the Regulation (EC) No 881/1992) regulates the Community licence for the international carriage of goods by road for hire or reward, under which any haulage undertaking with an establishment in a Member State may carry out its activities throughout the EU, subject to certain restrictions.
The licence is required only for transport of goods with vehicles whose weight maximum permissible load, including that of trailers, exceeds 3.5 tonnes. If, on the other hand, the maximum weight is 3.5 tonnes or less, transport does not require a Community licence and Art. 1.5(c) of the Regulation (EC) No 1072/2009 expressly exempts it from any special authorisation for international intra-Community transport.
The Community licence is issued by the competent authorities of the Member State where the haulage undertaking is established. The licence shall be unique for each enterpriseTherefore, it is necessary to request the issue of a number of certified copies corresponding to the number of (EU-registered) vehicles that the haulage company has at its disposal, even on a rental basis, leasing or other. A certified copy of the Community licence must be on board each vehiclewhich must be produced at the request of control officers (art. 4.6 of the Regulation (EC) No 1072/2009).
The EU licence is required for motor vehicles only and, therefore, in the case of a vehicle combination, it must be kept on the road tractor and also extends its effect to the trailer or semi-trailer. Only for the road tractor registration in a Member State is required, while the trailer or semi-trailer may also be registered in a third state.
(b) The driver attestation
With regard to drivers of vehicles carrying out intra-Community transport of goods by road for hire or rewardit is obviously necessary for them to have suitable driving startvalid for Europe. In addition to the driving licence, drivers who are not nationals of a Member State also require the driver attestation provided for in Article 5 of the Regulation (EC) No 1072/2009.
The driver attestation is issued to the haulage undertaking (and not to the driver himself) by the competent authorities of his Member State of establishment. It is a name documentwhich identifies the haulage company and the driver and certifies the regularity of the relevant employment relationship. A certificate and a certified copy must therefore be requested for each non-EU driver employed by the haulage company. The certificate must kept in the original in the vehicle driven by the non-EU driver and exhibited at the request of control officers, while the certified copy must be kept on the company's premises.
c) Hire contract and driver's employment contract
Article 2 of the EC Directive 2006/1 requires each Member State to allow road haulage companies established in other Member States the use on its territory of rented vehicles (or in leasing) without driverprovided that these vehicles are driven by personnel from the same company as the one using them. The following documents must be on board the vehicle:
- rental contract (or of leasing) or certified extract of the contract containing in particular the name of the lessor, the name of the lessee, the date and duration of the contract and the identification of the vehicle;
- driver's employment contract o certified extract of the contract, containing in particular the name of the employer, the name of the employee, the date and duration of the employment contract, or a recent pay slip.
Following this directive, the Italian State merely issued a ministerial circular (No 63/M4 of 08.05.2006 of the Ministry of Infrastructure and Transport) reiterating the obligation to keep the relevant hire contract and driver's employment contract on board the hired vehicle. However, ministerial circulars are not regulatory sources and, therefore, are not suitable for implementing the rules of a directive which, as is well known, only binds the Member States and cannot in any case be invoked as an act with direct effect against private individuals.
It can, however, be considered that theItalian law was already 'pre-conformed' to the directive and was not, therefore, obliged to implement it further, since already the Ministerial Decree No. 601 of 14.12.1987 laid down in Article 4 the obligation to keep the relevant hire contract and the driver's employment contract, both in original or certified copy, on board the hired vehicle. Consequently, in order to avoid probable disputes, these documents should always be kept in the hired vehicle.
lawyer Luca Andretto
collaborator at Studio Dindo, Zorzi & Associates
The Overtaking (1962)
Director: Dino Risi.