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.

 

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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.

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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).

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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

[: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

[: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[:]

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What is the difference between an agency contract and a business intermediary?

What is the main difference between the agent and the business intermediary?

To answer this question, one must first define the two professional figures.

La definition of agentor rather, of agency contract is given by the Civil Code, which provides in Art. 1742 of the Civil Code that

"By the agency contract one party permanently assumes the task of promoting, on behalf of the other, for remuneration the conclusion of contracts in a specified area." (the commercial agent in Germany)

The figure of the agent is not expressly regulated by the Civil Code and thus belongs to the category of atypical contracts, i.e. contracts not expressly regulated by civil law, but created ad hoc by the parties. However, a definition has been given by case law that has qualified the procurer as the one who:

  • "collects customers' orders by forwarding them to the company from which it has been commissioned to procure such commissions, without any stability and on an entirely occasional basis." (Cass. Civ. 1999 no. 1078);
  • "carries out intermediary activities for the purpose of facilitating the conclusion of business, when the activity is carried out on an occasional and occasional basis". (Cass. Civ. 1999 no. 1078).

From these definitions, it follows that the business intermediary differs from the commercial agent essentially with regard to the stability of tenure. Whereas the agent undertakes to promote (precisely) the conclusion of business deals on a permanent basis, the intermediary does not assume any obligation of continuous collaboration and may therefore freely decide whether or not to promote a deal (see also Main differences between the agency contract and the commercial distribution contract)

As to the requirement of occasionality(i.e., the frequency of business that is conveyed), the question arises in doctrine and case law as to how this parameter should really be interpreted as a criterion distinguishing mere procuring activity from agency. In an important ruling in 1999, the Court expressed itself as follows:

"Regarding the character of the continuityit should be noted that it not to be confused with the concept of stability. Stability, in fact, means that the performance is repeated periodically over time, not only de facto, as in continuous performance, but also in compliance with a contractual commitment (Art. 1742(1) of the Civil Code).

The difference is very clear in the case of the agent and the business intermediary. The former's performance is stable in that he is obliged to carry out an activity of promoting contracts; the service of the latter, on the other hand, is occasional in the sense that it does not correspond to a legal necessity, but depends exclusively on the initiative of the procurer. " (Cass. Civ. 1998 No. 7799).

According to this orientation, therefore, in order to distinguish the two figures, one must focus essentially on the obligations assumed by the intermediary: if the latter undertakes to promote business in stable and continuous manner, these will have to be qualified as agentwhereas, in the case does not undertake in any way to promote the principal's business, the principal will qualify as a business intermediary. The volume and quantity of orders that the two figures actually manage to promote have no relevance: paradoxically, the business intermediary may promote and realise a significantly higher number of orders than an agent, but the latter will still qualify as an agent if, contractually, he has not committed himself in any way to promoting the intermediary's activity. The performance of the intermediary is therefore occasional in the sense that it depends solely on his initiative.

Lastly, the question arises as to which of the provisions laid down for the agency contract may be considered applicable by analogy to the business agent contract.

In a judgement of 23.11.2007, the Court of Rome recently ruled that the two figures were applicable on the basis of their intrinsic distinction,

"only those provisions inherent to the agency contract, such as commissionswhich do not presuppose a stable and predetermined character of the relationship and not also those - of law and contract - which do presuppose it."

Basically, only certain agency rules apply to the agent by analogy, but it must be ruled out that those that grant special protection to the agent, such as Article 1750 of the Civil Code, concerning notice periods, and Article 1751 of the Civil Code concerning indemnity for termination of the contract, are applicable to it.

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Advance notice by the agent and continuation of the contractual relationship

In its judgment No. 668 of 25 May 2012, the Court of Cassation reaffirmed the principle of ultratractivity of the contractual relationship. According to that principle, an agency contract of indefinite duration does not terminate when one of the contracting parties terminates the contract, but only when the notice periodestablished in the interest and for the protection of the non-terminating party.

In the present case, the principal communicated his intention to terminate the contract; in the course of the notice periodthe agent also communicated its intention to terminate the contract.

According to the Court, this very declaration by the agent was to be regarded as an implicit waiver of the notice period, with the result that the agent could not request theindemnity in lieu of notice.

In the present case, therefore, given that "the termination of the relationship remains attributable to the will of the principal, the latter remains obliged to pay the termination indemnity pursuant to Article 1751 of the Civil Code."The agent, in fact, is entitled to the indemnity under Art. 1751 of the Civil Code even when he withdraws from the contract for circumstances that, although not constituting a just cause, are attributable to the principal.

 

 

Next stop: paradise (1991)
Directed by Albert Brooks

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Conference on the agency contract in the Civic Library.

[:it]Friday 8 June, 3 p.m, at the Verona Public Library conference on the Agency Contract was held, which I had the pleasure of organising in collaboration with Veronalegal. Participating as speakers were thelawyer Valerio Sangiovanni (lawyer in Milan), Dr Maura Mancini (Labour Magistrate at the Court of Brescia), Mslawyer Eve Tessera (French lawyer, registered in Verona) and the undersigned.

The following topics were covered:

I would like to sincerely thank all the participants of the conference and the speakers who proved to be not only extremely competent, but also very clear and helpful.

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