What are the consequences of the transfer of an agency contract? If the principal decides to make a business transfer, can the agent terminate the contract?

The legal institution of assignment of the contract is governed by arts. 1406 et seq. of the Civil Code. In brief, an assignment of a contract occurs when a party to a performance relationship (the assignor) enters into a new contract (assignment) with a third party (the assignee), whereby the assignor agrees to transfer to the assignee the original contract or, to be more correct, all the assets and liabilities arising from the assigned contract. The assignment of the contract is, therefore, a trilateral transaction, which is perfected only (pursuant to Art. 1406 of the Civil Code) with the consent of all parties: original contracting parties (assignor and assignee) and assignee.[1]

1. Assignment of the agency contract

The agency agreement, of course, is also subject to the general principles on contracts briefly referred to above. It follows that for the assignment of an agency contract to be valid, it must be communicated to and accepted by the assignee.[2]

With reference to the form of the contract of assignment, the silence of the legislature leaves a problem open; the jurisprudence is however constant in resolving it, affirming that the same forms prescribed for the contract of assignment must be observed for the contract being transferred, given that the assignment brings about a real subjective modification of the obligatory relationship.[3] By virtue of this principle, the assignment of the agency contract will also be subject to the written form ad probationem request pursuant to Article 1742(2) of the Civil Code.

Read also Formal requirements of the agency contract.

In the event that it is the agent who transfers the contractual relationship, it is essential to emphasise that the right of the same to receive severance pay formerly Article 1751 Civil Code. The second paragraph of that article provides that:

"L'allowance is not is due when pursuant to an agreement with the principalthe agent assigns to a third party the rights and obligations which it has by virtue of an agency contract."

This provision is based on the fact that the new agent succeeds to the overall legal position of the original agent, i.e. to all active and passive relationships arising from the assigned contract, among which is certainly included the right to severance pay.[4]

2. Agency contract and business transfer

Another very interesting topic, also related to the issue of the assignment of contracts, is the case of the succession of the relationship of agency following purchase of company.

This issue is governed by Article 2558 of the Civil Code.[5] which provides as a natural effect of the transfer of the company, the succession of the purchaser in all contractual relationships entered into for the operation of the company that do not have a personal character;[6] It is therefore a true and proper automatic transfer of the obligatory relationship, not subject to the consent of the transferred party, as provided for in the case of the assignment of the contract. With this provision, the legislator intended to ensure the preservation of the economic functionality of the business unit that has been transferred and, therefore, to protect the interests of the acquiring party.

It is important to emphasise that the parties (seller and buyer) may still derogate this provision and avoid the purchaser's consequent sub-entry into certain contractual relationships of the transferor, provided that the contractual relationship(s) that they intend to exclude from transfer do not have "personal character'. (cf. Civil Cassation No. 3312 of 2001).

The doctrine[7] tends to hold that the agency relationship should not be excluded a priori from contracts intuitu personaegiven the absolute heterogeneity of the category of commercial agents, which can take the form of both corporations and natural persons; contrary to majority case law[8] excludes that this contractual figure can be included among relationships of a personal nature, asserting that:

 "the agency contract is not of a personal naturebut constitutes a typical contract pertaining to the operation of the business and the organisation of the business structure, so that in the event of a transfer of the business it automatically continues with the transferee unless the parties have agreed otherwise."[9]

The fact that the agency contract is attributed the nature '.staff" means that it is impossible to apply to the same the discipline of Article 2112 of the Civil Code.,[10] which gives employment relationships greater protection in the event of transactions involving the transfer of a company.

Firstly, formerly Article 2112 of the Civil Code, employment relationships automatically continue in the hands of the transferee and (unlike the discipline under Article 2558 of the Civil Code) this provision is mandatory by the parties.

Secondly, Article 2112 of the Civil Code gives the employee the right to resign within three months of taking over the business if there has been a substantial change in working conditions; otherwise, Article 2558 of the Civil Code provides for the possibility of terminate the relationship within three months of being informed of the transferonly if there is a just cause:

 "the agent does not enjoy absolute freedom of absolute, but rather conditional on the existence of a just cause."[11]

In order to understand the extent to which the agent is entitled to terminate the contract if the principal sells the business, a 2007 judgment comes to our aid, which expressed the following principle:

"the agent has the right to terminate the contract for just cause in the event that for reasons extrinsic to the contract, not directly inherent in it, the substitution of the assignee to the assignor as counterparty to the contractual relationship creates a situation in view of which would have refused to contract if had he known in time. "

To give a practical example, the following may be invoked as a cause for termination of the agency relationshipinsufficient security of financial strength of the buyerwhich does not guarantee to the third party a regular performance of the obligations arising from the continuation of the term contract.[12]

3. Debts prior to the transfer of the business

In the event of a transfer of the principal's business, the purchaser's succession in the existing relationship with the agent, does not imply an automatic cumulative assumption of pre-sale debts (e.g. unpaid commissions). The fate of the debts relating to the transferred business is governed by Art. 2560 of the Civil Code, according to which the transferor is not discharged if the debts predate the transfer (para. 1) and the same are apparent from the compulsory account books (para. 2).

The following is an excerpt from a 2017 judgment of the Court that was questioned on this issue:

"The sole (alleged) transmission of accounting documents relating to the agency contract (transferred to the successor company pursuant to Art. 2558 of the Civil Code) is certainly not equivalent to also mean that the condition expressly required by Art. 2560, para. 2, i.e. the entry of the debts in the mandatory books of account compulsory books, so that the accessory joint and several obligation of the purchaser of the business of the purchaser of the transferred business.

Therefore, anyone wishing to assert the corresponding claims against the purchaser of the business has the burden of proof among the constituent elements of one's right also called inscription.[13]

Read also The principal's bankruptcy and the agent's lodgement of liabilities.

[1] For an overview of the institution see TORRENTE AND SCHLESINGER, Manual of Private Law Private Law, GIUFFRÈ EDITORE.

[2] On point, see Court of Reggio Calabria, 15.1.2003, which ruled that "For the purposes of of the assignment of the agency contract, the the consent of the assigned contractor. "

[3] Cass. Civ. 2001 no. 10498; Cass. Civ. 1993 no. 12163.

[4] Cf. VENEZIA, Il contratto di agenzia, p. 462 et seq., 2015, Giuffrè Editore.

[5] Art. 2558 of the Civil Code states "unless otherwise agreed, the acquirer of the holding shall take over contracts concluded for the operation of the holding that are not of a personal nature. of a personal nature.

[6] Cf. point Cass. civ. Sec. II, 19/06/1996, n. 5636

[7] Cf. VENEZIA, The Agency Contract, p. 462 et seq., 2015, Giuffrè Editore; TRADATI, Il contratto di agenzia nel trasferimento d'azienda, in Agenti & Rappresentanti 2003, no. 4, p. 14 ff.

[8] Cass. Civ. 2017 no. 15956, Court of Perugia 17.5.2011 Cass. Civ. 2004 no. 21678, Trib. Reggio Emilia 8.2.2002. Contra for the personality of the contract of agency, with the consequent necessity of consent for its assignment Trib. Reggio Calabria 15.1.2003.

[9] Trib. Di Reggio Emilia 8.2.2002.

[10] Cass. Civ. 2004 no. 21678, Cass. Civ. 2000 no. 6351.

[11] Court of Perugia 17.5.2011.

[12] Cass. Civ. 2007 no. 21445, with note by SANGIOVANNI, Obbligazioni e contratti, no. 5, 2008.

[13] Cass. Civ. 2017 No. 15956.