The termination of the sales and/or distribution dealership contract. Brief analysis.
"The sales concession contract is not governed by Italian law and follows the general rules on contracts, with the application of certain principles regarding mandate and administration. If the contract is concluded for a fixed term, it cannot be terminated in advance unless there is a serious breach; if for an indefinite term, it can be terminated unilaterally with due notice. The notice period, if not agreed, is determined on the basis of the duration of the contract and the investments made; if the parties have agreed and contractually quantified notice period is discussed whether theThe judge can make assessments of its appropriateness.
Since the contract of sale concession is not expressly regulated by our law, the general principles provided for contracts apply to it, paying particular attention to the provisions provided for the contract of supply (1559 et seq. civil code) and mandate (1703 et seq. civil code), types of negotiation very close to the one under consideration.
If the concession contract was concluded at fixed-termit will last until its natural expiry and cannot therefore be unilaterally terminated early by either party, except in the case of (serious) breach.[1]
Conversely, if the sales concession contract is of indefinite duration, it may be terminated unilaterally, without the need to invoke just cause, but subject to the granting of a reasonable notice. Doctrine and jurisprudence reach this conclusion, both by analogical application of the principles dictated on the subject of administration (Art. 1569 of the Civil Code).[2] and mandate (Art. 1725 of the Civil Code),[3] but also relying on the general provisions of the law in the area of unilateral termination and applying the principles of good faith under Article 1375 of the Civil Code.
A major problem opens up concerning theidentification of the duration of the noticein all those cases where the parties have not contractually agreed to do so; this may occur not only where the parties have not thought of regulating this issue when drafting the master agreement, but also in the much more complex situation where the relationship between the parties, which started out as a simple buyer-seller relationship, has in fact over time 'transformed' into a full-fledged distribution contract (on this point, see the article Dealer, distributor or regular customer? Differences, characterising elements and interpretation criteria).
In order to understand what is meant by adequate notice and, therefore, to give a time value to this term, reference must be made to the interests of the person who 'suffers' the withdrawal, since the withdrawing party must grant a term that will allow preventat least partially, the negative effects resulting from the termination of the relationship;[4] Therefore, the concessionaire must be able to recover part of the investments made (e.g. the disposal of inventories), while the grantor must have sufficient time to be able to buy back goods still in stock from the concessionaire, so that they can be reintroduced into the distribution circuit.[5]
To give a more practical slant to this issue, we list below some cases decided by case law where it has been held that[6]
- a deadline of 18 monthswith reference to a contract that lasted about 25 years;[7]
- not congruous a deadline of 6 months (later replaced by one of 12 months), for a contract of 10 years' duration;[8]
- reasonable notice of 3 months in connection with a 26-month contract.[9]
In other situations, case law has applied the period of notice required by agency regulations.[10]
If, on the other hand, the parties had agreed and contractually quantified notice periodThe majority of case law is in agreement that reference must be made to that term in any event, even if it is very short, holding that the judge cannot make any assessment of the appropriateness of the notice period agreed upon by the parties.[11]
With reference to this specific issue, i.e. with regard to the reviewability of the notice period agreed upon by the parties, it is certainly important to bear in mind a relevant ruling of the Court of Cassation of 18 September 2009,[12] which established a number of interesting principles. On the merits, the dispute was brought by an association set up by several former car dealers against the parent company Renault, which had terminated the contractual relationship with those dealers by giving one year's notice, in accordance with the contractual provisions; the dealers sought a declaration that the termination was unlawful because abuse of right. These proceedings were dismissed at first and second instance, but upheld at last instance by the Court, which held that it could not be ruled out whether the right of withdrawal ad nutum has been exercised in good faith, or, on the contrary, an abusive exercise of that right may be conceivable. The Supreme Court came to this conclusion through the use of the criterion of objective good faith, which must be considered as "general canon to which the conduct of the parties should be anchored."[13]
This orientation has been challenged by some doctrine,[14] which he considered should be "considered with the utmost caution". This is confirmed by the very fact that:
"at is to be hoped, that the notion of abuse of rights will continue to be applied only in extreme and justified cases."
In contrast, there is no doubt about the validity of the termination in trunkand thus without the grant of notice, in the event of just cause.[15]
As to the inclusion in the distribution contract of a express termination clausedoctrine and jurisprudence agree that it can be validly included in the agreement (contrary to the guidelines on agency contracts).
If the relationship is terminated without cause, the terminating party is obliged to compensate the damage to the person who suffered such an action. For the purpose of calculating damages, account must be taken of the profits that the dealer would have presumably obtained in the remaining part of the contract (on the basis of the turnover history) or of the expenses incurred by the dealer for the organisation and promotion of sales in anticipation of the longer duration of the relationship.
Instead, case law is unanimous in holding that thetermination indemnity in favour of the concessionaire must be excluded and cannot be applied to this type of contract. agency provisions.[16]
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[1] Cass. Civ. 1968 No. 1541; in doctrine Il contratto di agenzia, Venice - Baldi, 2015, p. 139, CEDAM.
[2] It is the unanimous conviction in doctrine that Article 1569 of the Civil Code, relating precisely to the contract of supply, according to which either party may withdraw from the contract without the need to invoke a just cause, may be applied analogically to this case (see on this point I contratti di somministrazione di distribuzione, Bocchini and Gambino, 2011, p. 669, UTET)
[3] Concession of Sale, Franchising and Other Distribution Contracts, Vol. II, Bortolotti, 2007, p. 42, CEDAM.
[4] In doctrine Il contratto di agenzia, Venice - Baldi, 2015, p. 140, CEDAM; In jurisprudence Court of Appeal Rome, 14 March 2013;
[5] I contratti di somministrazione di distribuzione, Bocchini and Gambino, 2011, p. 669, UTET
[6] Distribution Contracts, Bortolotti, 2016, p. 564, Wolters Kluver.
[7] Trib. Treviso 20 November 2015 in Laws of Italy.
[8] Trib. Napoli 14 September 2009 in Laws of Italy.
[9] Trib. Bologna 21 September 2011 in Laws of Italy.
[10] Trib. Bergamo 5 August 2008 in Agents and Sales Representatives 2010, No. 1, 34.
[11] See Trib. Torino 15.9.1989 (which considered a term of 15 days to be congruous); Trib. di Trento 18.6.2012 (which considered a term of 6 months for a 10-year relationship to be congruous).
[12] Cass. Civ. 2009, no. 20106.
[13] Cass. Civ. 18.9.2009 "On the subject of contracts, the principle of objective good faith, i.e. of mutual loyalty of conduct, must govern the performance of the contract, as well as its formation and interpretation and, ultimately, accompany it at every stage. [...] The obligation of objective good faith or correctness constitutes, in fact, an autonomous legal duty, the expression of a general principle of social solidarity, the constitutionalisation of which is by now unquestionable (see in this sense, among others, Court of Cassation Civ. 2007 no. 3462.)"
[14] Distribution Contracts, Bortolotti, 2016, p. 565, Wolters Kluver
[15] Court of Appeal Rome, 14 March 2013
[16] Trib. Trento 18.6.2012; Cass. Civ. 1974 no. 1888; Contratti di distribuzione, Bortolotti, 2016, p. 567, Wolters Kluver; Il contratto di agenzia, Venezia - Baldi, 2015, p. 153, CEDAM
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.
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.
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