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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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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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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