The probationary period in the agency contract: is it valid? The European Court of Justice gives its ruling.
In practice, it is very common for the parties to subject the agency contract to a so-called 'probationary agreement'; the purpose pursued by such an agreement is to protect an interest common to both parties, namely that of ascertain the cooperation relationshipthrough concrete experimentation.
By entering into this agreement, the parties are given the option, during the probationary period, to terminate the contract without observing any period of notice and without the need to state any reasons.
The probationary period should therefore be understood as a sort of preliminary phase of the contract in which the parties intend to mutually test the cooperation relationship, which would only assume a stable character once this period has been successfully completed.[1]
Although this institution is not expressly regulated in our legal system,[2] in principle, the probationary period must be considered admissible in the agency contract, irrespective of whether it was concluded for a fixed term or an indefinite term.[3]
Such a covenant responds to the need of the parties to verify the mutual convenience of giving stability to the contract, according to part of the doctrine,[4] during the probationary period, the parties may terminate immediately, without the need to give any notice period. This position has also been confirmed by less recent case law, which has upheld not only the legitimacy of the probationary period, but also the granting to both parties of the right to terminate during the probationary period with immediate effect, without just cause.[5]
As for the duration of the covenant, it must be limited "the time necessary and sufficient to carry out the evaluation".[6] To translate this principle into practical terms, it is necessary to consider the individual relationship on a case-by-case basis, taking into account, of course, the sector in which the parties operate, the type of products being promoted, and using good faith as a yardstick; in any case, to give an indicative time reference, one can consider reasonable a probationary agreement with a duration of between two and six months.[7]
With reference to the agent's right to obtain aseverance pay in the event of termination of employmentfor an act not attributable to the agent, the majority Italian jurisprudence has held in recent decades that:
"if the principal terminates the agency contract during the probationary period, the agent is not entitled to the indemnity for termination of the contract pursuant to Art. 1751 of the Civil Code."
However, on this issue, the European Court of Justice by judgment of 19.4.2018in which the Luxembourg judges decided a dispute, referred for a preliminary ruling by the Cour de Cassation French, concerning an authentic interpretation of Directive 86/653/EEC on commercial agents; specifically, it was asked whether or not the directive gives the parties the power to exclude the agent's right toallowance in the event of termination of the contract, during the contractually agreed trial period.
The dispute had originally arisen between an agent and a principal, both operating in France in the real estate sales sector, who had included in an agency contract a twelve-month trial period; during this period, the agent had also obliged itself to conclude the sale of twenty-five houses.
Approximately five months into the relationship, as the agent had only managed to conclude one sales contract, the principal terminated the relationship with immediate effect, confident that, as the relationship was still in the "experimental"No notice or indemnity was due to the agent.
The agent, on the other hand, was of a different opinion. He contested the termination without just cause, considering that, although the relationship was still in the probationary period, he was nevertheless entitled to receive the termination indemnity, as well as compensation for damages, provided for by French law.
The issue, after having been decided differently at first instance and on appeal, was referred by the Cour de Cassationto the Court of Justice.
The European Court, as a preliminary remark, noted in its reasoning that although the directive not contains no reference to the notion of "probationary period", this omission cannot be interpreted as a prohibition to the use of that instrument by the contractors.
The judgment then went on to analyse the function that the directive had conferred on the severance pay, noting that this institution did not so much pursue a sanctioning purpose but, rather, one of indemnify the agent
"for services performed, from which the principal continues to benefit after the termination of the contractual relationship, or for charges and expenses incurred for the purpose of such services."
The Court goes on to note that Article 18 of the directive itself expressly regulates the cases in which the indemnity is not due and that this list is to be interpreted restrictively,[8] the probationary period is not included.
On the basis of the elements summarised above, the Court therefore held that:
"l'the interpretation that no indemnity is due in the event of termination of a commercial agency contract during the probationary period is not compatible with the mandatory nature of the rules established by Article 17 of Directive 86/653. In fact, such an interpretation, which would result in making recognition of the indemnity conditional on whether or not a probationary period was agreed in the commercial agency contract, without taking account of the services rendered by the agent or of the costs and expenses incurred by him, contrary to Article 17 itself, constitutes [...] an interpretation to the detriment of the commercial agent, who would be denied any indemnity on the sole ground that the inter partes contract provided for a probationary period.
This ruling will certainly have a very strong impact on what will be the use of the probationary covenant in the agency contract; indeed, although the Court does not delegitimise the possibility of the parties to provide for a probationary covenant in the agency contract, in fact, makes it less interesting to use such an instrumentthe parties will no longer be able to exclude the agent's right to receive the termination indemnity.
Thus, what was the founding assumption and the purpose that always prompted contracting parties to enter into a probationary agreement, i.e. to agree on an initial period of the relationship, in which the parties can test each other, without worrying about the consequences, in case they do not intend to make the relationship stable, falls away.
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[1] On this point - VENICE - BALDI, The Agency Contract, 2014, p. 344 ff.
[2] Without prejudice to Article 2096 of the Italian Civil Code, which regulates the probationary period in subordinate employment and which, due to its special nature, cannot be applied analogically to the agency contract - On this point see VENEZIA - BALDI, Il contratto di agenzia, 2014, p. 344 et seq. Reference is instead made to the probationary agreement in some collective economic agreements and specifically: in the contract between Federagenti and CNAI of 22.4.2013, (statement in the minutes art. 10), a trial period of a maximum duration of 6 months is provided for; AEC commercio 2009, art. 2 and AEC industria 2014 art. 4, where it is provided that, in the event of one or more renewals of the agency contract, the principal may establish a trial period only in the first contract.
[3] On this point see Trib. Grosseto 30.11.2004; Trib. Firenze 2.10.2003; Trib. Milano 18.12.1986; In doctrine PERINA - BELLIGOLI - Il rapporto di agenzia, 2014.
[4] TRIONI - Contratto di agenzia, in Commentario del Codice Civile, Bologna, 2006.
[5] Cass. Civ. 1991 no. 544.
[6] Trib. Turin 7 July 2004.
[7] VENICE - BALDI, The Agency Contract, 2014, p. 344 ff.
[8] In this sense, Court of Justice, 28.10.2010, Volvo Car Germany, C-203/09.
