This article describes some of the most significant aspects of a (self employed) commercial agency agreement according to Italian Law. First of all, it has to be underlined that commercial agency agreement in Italy is governed by different laws, including but not limited to:
- Italian Civil Code (Art. no. 1742 and subsequent articles):, definition, rights and obligations for the parties;
- EU directive (86/653/EEC): coordination of the law of the Member States;
- Italian National Collective Bargaining Agreements (“AEC”): unilateral changes, indemnity for termination, etc.;
- Code of Civil Procedure (Art. no. 413): jurisdiction.
The definition of commercial agency agreement is provided by Art. no 1742 of the Civil Code, pursuant to which said agreement is a contract whereby one party (the agent) assumes permanently the task of promoting products and/or services on behalf of another (the principal).
The same civil code lists the rights and obligations of each party. Indeed, according to Art. no 1746 the agent shall:
- Promote the goods and services subject to the contract;
- Act in good faith in the principal interest;
- Comply with the instructions received by the principal;
- Provide the principal with any information useful for the evaluation and execution of the contracts.
On the other hand, according to Art. no 1749 of the Civil Code, the principal shall:
- Pay commercial agent commissions;
- Act with the utmost good faith and loyalty;
- Provide the agent with information and documents as needed to perform the task;
- Inform the agent of the success of the business procured by the latter.
Pursuant to Art. no 1743 of the Civil Code, exclusive right is granted either in favour of Agent and in favour of Principal, and therefore:
- Agent may not promote products and/or services which are in competition with principal’s products and / or service;
- Principal may not employ other agents in order to promote the same products and/or services, in the same territory.
However, Parties may decide by mutual agreement to derogate from exclusivity provision.
With regard to agent remuneration, in exchange for the activity carried out, Art. no. 1748 states that the agent is entitled to the commission under the following circumstances:
- Conclusion of a transaction as a result of agent’s action;
- Conclusion of a transaction with third parties that the agent had previously acquired as customers (except if otherwise agreed);
- Conclusion of a transaction after the agency agreement termination and the successful outcome is however attributable to the agent.
Furthermore, pursuant to the most recent collective agreements (AEC industry – 2014, AEC trade – 2009), the following types of indemnity are recognized to the agents, which lend their side and supplement the code regulations:
- Indemnity for contract termination (“FIRR”), due even in the event that the agent has not made an increase in customers and/or turnover for the principal;
- Supplementary customer indemnity, connected exclusively to the amount of commissions received during the contractual relationship by the agent
- Merit indemnity, that is only foreseen if the aggregate amount of the first two indemnities is lower than the maximum determined according to the paragraph no. 3 of Article 1751 of the Civil Code and the agent can claim some merits in terms of business development.
In accordance with AEC trade sector, signed in 2009 by agents’ and principals’ associations, the principal is granted the possibility of making unilateral changes of contract terms, in relation to the area, products, customers or the commission rate. Said changes may be classified as follows:
- Small entity variations (up to 5%) can be made without notice and are effective from the moment the communication is received by the principal;
- Medium-sized variations (between 5% and 20%) require written communication with a minimum notice of 2 months for multi – firm agents, or 4 months for single – firm agents;
- Major variations (over 20%) require written communication to the agent with notice equal to that required for the termination of the relationship.
Shall the agent refuse said changes, then the communication that Principal sent is to be considered as a notice of termination of the contract.
Eventually, according to Art. no. 413 of the Code of Civil Procedure, any dispute arising between the parties of a commercial agency agreement shall be resolved by the court in whose district the agent’s domicile is located. The aforesaid provision is mandatory in case of an agent working as a natural person.