Agent's right to commissions on business concluded after termination of the relationship.
When the agency relationship comes to an end, it is often the case that the agent has reported some business, or has simply started negotiations that resulted in an agreement following the termination of the contract.
In some (rarer) cases, the agent has concluded long-term contracts before the termination of the relationship.
Understanding whether or not the agent is entitled to commissions on business concluded after termination is of essential importance
In order to understand whether the agent is entitled to commission on business concluded after the termination of the contract, it is first necessary to identify which of these business transactions fall under the terminated relationship and which are to be regarded as excluded, since it is from this that the actual accrual or non-accrual of commission is determined.
In this article we will first briefly analyse the more typical case, relating precisely to business concluded after the termination of the relationship, and then delve into the rarer (but no less important) case of long-term contracts, which were concluded before the termination of the agency relationship.
1. Commissions on contracts concluded after the termination of the contract.
1.1. Civil law regulations.
Following the termination of an agency relationship, it is often the case that the agent has reported certain business to the principal, or has initiated certain negotiations that resulted in an agreement following the termination of the contract. In such cases, it is necessary to understand which of these deals fall under the terminated relationship and which are to be regarded as excluded, since the actual accrual or non-accrual of commission is determined by this.
This issue is governed by para. 3 of Civil Code 1748, which provides that the agent is entitled to commission on business concluded after the date of termination of the contract if:
- "the proposal was received by the principal or agent prior to or
- the business is concluded within a reasonable time from the date of termination of the contract and the conclusion is predominantly attributable to the activity performed by the agent, unless specific circumstances show an equitable distribution of the commission among the agents involved."
This approach[1] is intended to prevent the principal from running the risk of paying a double commission: one to the outgoing and one to the incoming agent.[2] In the event of termination of the relationship, therefore, the agent will be entitled to the commission:
- whether it forwarded the order to the principal prior to the termination of the contract, or whether the principal received it directly from the local customer (in the event that the agent is entitled to indirect commission);
- In other cases, the commission is only due if the deal has been concluded within a reasonable term from the date of termination of the contract and the conclusion is mainly attributable to to the activity carried out by the agent himself.
The second hypothesis, i.e. the one that recognises the agent's commission even if the proposal is received after the termination of the relationship, as long as it is concluded within a reasonable time, certainly requires more attention.
One of the major problems of interpretation is to identify what is to be understood by 'reasonable time'i.e. what is the maximum time limit for the agent to still be entitled to commission. On this point case law is not uniform, one reads of cases that have set this term at six months[3] and others who considered an even two-year time limit reasonable.[4] However, it must be held that the reasonableness of the time limit must also be judged on the basis of the industry sector in which the agent has operated and the customs in force in that relationship.
1.2 The AEC Framework.
Certainly clearer is the discipline of AEC Industry 2014which in Art. 6, last paragraph, provide that the agent is entitled to commission on the business proposed and concluded even after the termination of the contract, not only if the conclusion of the business is the effect of its activity, but also make it subject to the fact that
- Upon termination of the relationship, the agent must report to the principal in detail on the commercial negotiations undertaken, but not concluded, due to the termination of the agency contract;
- if, within a period of six months from the date of termination of the relationship, any such negotiations are successful, the agent shall be entitled to the relevant commissions;
- Once that period has elapsed, the conclusion of any order, whether or not included in the agent's report, shall no longer be considered a consequence of the agent's activity and no commission shall therefore be paid;
- no commission shall be due for business concluded even within six months, but not indicated in the report.
2. The right to commissions on long-term contracts.
Where the agent in the course of the relationship promotes term contracts, the entitlement to commission on deliveries made in performance of the contract procured after the termination of the relationship depends essentially on the nature of the term contract.
In principle, in the event that the term contract is a a supply contract, a subcontracting contract, or a sales contract with divided deliveriesit may be stated that (unless otherwise agreed),[5] the agent is entitled to commission on all deliveries made even after termination of the agency contract, since these are in fact acts of performance of a contract concluded in the course of the relationship.
Conversely, where the contract promoted is a framework contractwhere each supply is to be the subject of a further agreement (order - acceptance), in which case the individual supplies are to be regarded as independent sales contracts,[6] even if concluded in the context of the framework contract, with the consequence that such subsequent sales contracts will not give rise to an entitlement to commission (unless the agent can prove that such business is attributable to its promotion activity and was concluded within a reasonable time).
Continuing with the reasoning, if, on the other hand, the term relationship is signed by the principal following the termination of the relationshipIn order to understand whether the agent may be entitled to commission, it will not be sufficient to ascertain the nature of the relationship of duration, but also to prove that the conclusion of the transaction is attributable to the agent's promotional activity.
A very interesting case is recalled below,[7] which was decided by a series of three judgments of the Court of GrossetoA case in point was the following: an agent, following burdensome negotiations lasting several months, had procured for the principal (a company operating in the frozen food sector) a deal with a chain of supermarkets for the indefinite supply of frozen and pre-packaged ready meals. The administration contract was concluded a few months after the termination of the agency relationship.
The agent sued the principal for payment of commissions on supplies made in performance of the supply contract. By judgment No. 52/2012, the Court of Grosseto upheld the agent's claims, holding that:
"the administration contract was formally concluded [...]. just over two months after the termination of the agency contract [...], a term that must be considered, due to its objective brevity, absolutely reasonable.
Although the Court had found that the agent was entitled to commissions, it rejected the plaintiff's claim seeking an order that the principal pay them
"until the end of the administration contract [...] as this would be a pronouncement of sentence 'in the future' related, moreover, to a term that was not identified by the parties in the administration contract, since the same contract was concluded for an indefinite period."
The agent, a few years after the delivery of the first judgement, brought a further action, in which it sought an order that the principal be ordered to pay commissions on supplies made after the expert valuation referred to in the first judgement. The agent based its claim on the principle of Article 2909 of the Civil Code.according to which the finding contained in the final judgment shall be conclusive for all purposes between the parties. The Court again condemned the principal, stating that
"the right to obtain the payment of the commissions that will gradually accrue in relation to the prolonged performance of the supply contract, is unquestionable and has already been ascertained in the irrevocable ruling issued by this Office with the consequent application of the revocatory effect provided for by Article 2909 (on this point, among others, Court of Cass. Sez. Lav. 2001 no. 4304).
Following this ruling, in order to avoid the payment of commissions on future business, the principal proceeded to effectively giving up the business to a company of the same group, also active in the frozen food sector. The agent then appealed again to the Court of Grosseto, arguing that the assignment of the duration contract pursuant to Article 1406 of the Civil Code entailed the transferee's obligation to pay commissions. The Court of Grosseto,[8] again supported the plaintiff's argument, stating that:
"since the characteristic feature of the assignment of the contract under Art. 1406 of the Civil Code is that it has as its object the transmission of a unitary set of active and passive legal situations resulting from each party to the contract [...], the transferee shall be obliged to pay to the plaintiff commissions - in the same amount as agreed in the agency contract - on the supplies of frozen food products made to X srl."
3. Commissions on long-term contracts and severance payments.
Lastly, it should also be emphasised that the signing of term contracts can be used as a determinant for prove that the conditions required by Article 1751 of the Civil Code are fulfilled.for the agent's right to receive severance pay (cf. Agent's severance pay. How is it calculated if AEC does not apply?). We read in an interesting Supreme Court ruling that:
"The termination indemnity compensates the agent for the asset increase that its activity brings to the principal by developing the goodwill of the business. It follows that this condition must be deemed to exist, and the indemnity is therefore due, where the contracts concluded by the agent are contracts of duration, since the development of goodwill and the continuation of benefits to the principal, even after the termination of the agency relationship, are in re ipsa'..[9]
[1] Article reformed by Legislative Decree No. 65/1999, by which the legislature transposed the principles of European Directive No. 86/653 and, in particular, Article 8, which provides as follows: "For a commercial transaction concluded after the termination of the agency contract, the commercial agent shall be entitled to commission; (a) if the transaction is mainly due to the result of the work performed by him during the agency contract and if the transaction is concluded within a reasonable period after the termination of the agency contract, or (b) if, in accordance with the conditions set out in Article 7, the order placed by the third party was received by the principal or the commercial agent before the termination of the agency contract. "
[2] Cf. Court of Rimini, 22.9.2004, No. 238, which excluded the agent's right to commissions in the event of extensions of supply offers, given the absence of the former agent's preponderant promotional intervention. On this point see VENEZIA, Il contratto di agenzia, pg. 281, 2015, CEDAM.
[3] Cass. Civ. 2006, no. 2824, in Leggi d'Italia
[4] Cass. Civ. 2013, no. 894, in Leggi d'Italia
[5] Art. 1748 para. 3 of the Civil Code, on commissions due for business concluded after termination of the contract, is entirely derogable: in favour Saracini-Toffoletto, Il contratto di agenzia. Commentario, 2014, GIUFFRÈ and Bortolotti, op. cit., p. 276; contrary, Trioni, who holds that this rule is not mandatory, given that the third paragraph of Art. 1748 cc, unlike the second and fourth, does not expressly provide for the salvation of contrary agreements.
[6] See on this point BORTOLOTTI, Concessione di Vendita, Franchising e altri contratti di distribuzione, p. 8, 2007, CEDAM.
[7] For more details see Giulia Cecconi, Le provigioni sui contratti di durata, in Agents and sales representatives, 1/2019, PUBLISHING AGE.
[8] Court of Grosseto, Judgment No. 269 of 2018.
[9] Cass. Civ. sez. lav. no. 24776 of 2013.
