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 conduct 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 to replace 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 occurs 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.