Business intermediary and commissions: when the right to commissions is subject to the communication of commencement of activity
In a recent ruling, the United Sections of the Court of Cassation affirmed that a person who engages in the activity of business intermediary without having communicated the commencement of business is obliged to repay the commissions received to the contracting parties.
The Court's reasoning is very complex and tortuous due to a very tortuous and non-linear regulatory framework.
In order to understand the reasons that prompted the United Sections to affirm that a business intermediary's right to commissions is subject to the obligation to commence business, it is necessary to take a few steps back and retrace what has been the regulatory path governing a figure very similar to the business intermediary, namely the broker, and thus understand how such regulatory interventions may have had such serious repercussions on business intermediaries.
1. The abolition of the role of mediators.
Until 2010, the role of mediators was governed by Article 2 of Law 1989/39, which imposed compulsory registration on all persons who carried out mediation activities, even if on a discontinuous or occasional basis. The role was divided into three sections:
- one for real estate agents,
- one for commercial agents and
- one for agents with a mandate for pecuniary interest.
Art. 73 of Legislative Decree 26.03.2010, no. 59 repealed theArticle 2 of Law 1989/39, thus going to abolish roles listed above.
Following this legislative change, the performance of the activity of real estate broker is only conditional on the:
- DIA (Dichiarazione Inizio Attività) - now SCIA (Segnalazione Certificata di Inizio Attività) - accompanied by self-certifications and certifications proving possession of the requirements;
- verification of requirements by the territorially competent Chamber of Commerce and consequent registration of brokers in the RI (Register of Companies) if the activity is carried out in the form of a company, or in a special section of the REA (Register of Economic and Administrative News).
Given that Legislative Decree 2010/59 abolished the role of mediators, but did not repeal Law 1989/39 in its entirety, the question arose as to how Article 6 of this regulatory text, which subordinates the mediator's right to commissionto its proper registration. Article 6 reads as follows:
"only those who are registered on the rolls are entitled to the commission".
Majority Jurisprudence[1] has ruled, stating that only brokers who have reported the start of their activity to the competent Chamber of Commerce and have been duly registered in the business registers or directories kept by that body are entitled to receive the commission. It reads, in fact, that:
"Article 6 of Law No. 39 of 1989, according to which , must be interpreted as meaning that, also for mediation relationships subject to the rules laid down by Legislative Decree No. 59 of 2010, only mediators who are registered in the registers of companies or in the directories kept by the chamber of commerce are entitled to commission. "
2. Difference between business intermediary and broker.
That being clarified, the question arose as to whether only brokers should be subject to this reporting obligation, or also business intermediariesde facto brokering activities.
Before giving an answer to this question, it is necessary to briefly understand the distinction between mediator and business procurer. Pursuant to Art. 1754 of the Civil Code, mediatoris the one who
"brings two or more parties together for the conclusion of a transaction, without being linked to any of them by a relationship of collaboration, dependence or representation".
The mediator therefore carries out his or her activities without constraints and assignments, in a position of impartiality and autonomy.[2]
In contrast, the business procurer acts as instructed by one of the parties, thus lacking the requirement of independence. A 2016 ruling by the Supreme Court of Cassation, which confirms a well-established orientation, distinguishes the two figures by asserting that:
"mediation and the atypical business procurement contract differ in terms of the position of impartiality of the mediator than that of the procurer who acts on behalf of one of the parties involved in the conclusion of the transaction and from whom, although not linked to that party by a stable and organic relationship (unlike the agent), he may claim remuneration.
The Court goes on to analyse what these figures have in common, namely:
"the element of the provision of an intermediary activity aimed at facilitating the conclusion of business between third parties."
Case law has held that both the figures perform de facto activities of 'brokerage"has framed the business intermediary as an 'atypical' mediator, which is distinguished from the 'typical' mediator precisely by the character of 'partiality'.
Given the inclusion of the intermediary in the 'category of brokers', the following question consequently arose: must the intermediary also comply with theobligation to notify the start of activities? The question was not (and is not) without practical consequences, since, as mentioned above, the failure to report the commencement of activity to the competent Chamber of Commerce causes the broker's right to commissions to lapse pursuant to Article 6 of Law 1989/39.
On this point, the United Sections of the Supreme Court intervened, which with Judgment No. 19161 2017firstly confirmed to be:
"In addition to ordinary mediation, a so-called atypical mediation based on a contract for pecuniary consideration can also be configured with respect to only one of the parties involved (so-called unilateral mediation)."
Secondly, they also stated that:
"precisely because of its extrinsic nature as an intermediary activity, falls within the scope of applicability of the provision laid down in Article 2(4) of Law 39/89, which, precisely, also regulates hypotheses atypical mediation for the case where the object of the deal is real estate or companies."
Conversely, where the subject matter of the deal is the movables:
"the obligation to register exists only for those who perform the said activity in a manner not occasional and therefore professional or continuous."
Therefore, the obligation to register in the brokers' register also extends to all business brokers who broker real estate or companies (even occasionally), or movable goods (on a professional basis).
La penalty for failure to report is rather strict, and is governed by Article 8 L. 1989/39:
Anyone engaging in mediation without being registered shall be punished with the administrative penalty payment of a sum of between one million and four million lire and is liable to the return to the contracting parties of the commissions received."
3. Difference between commercial agent and broker.
At this point, it is considered appropriate to make a very brief analysis of the distinction between commercial agent and brokerwhich is thus summarised by the ruling of the United Sections under examination:
[the mediator] "acts in a third-party position with respect to the contracting parties in contact, in this respect differing from the commercial agent, who, on the other hand, implements a habitual and professional collaboration with another entrepreneur. "
The reason for drawing this distinction is to emphasise the fact that, although the commercial agent is also obliged to report the start of his activity (Art. 74 of Law 2010/59, repealed not only the role of mediators, but also those of agents), failure to comply with this duty does not entail the forfeiture of the right to commissionsis not foreseen in the Law 1985/204which regulates precisely the activity of commercial agents, a sanction similar or comparable to the one examined in this article.
- Read also: Differences between agency contract and business intermediary.
Bearing in mind this substantial difference between an agent and a broker (typical or atypical), it is advisable to check with one's advisor, in the event that a principal contests the payment of commissions to the intermediary for not being registered in the register of intermediaries, whether the activity carried out by the intermediary should actually be considered as such or, on the contrary, should be considered an agency activity 'disguised' as an intermediary activity.
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[1] On this point cf. Cass. Civ. No. 762 of 2014; Cass. Civ. no. 10125 of 2011, Cass. Civ. no. 16147 of 2010.
[2] On this point cf. Cass. Civ. No. 16382 of 2009.
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.