Breach of the exclusivity right in agency: damages compensable also by competing agents

25 October 2022

An agent, whose exclusive right has been infringed by the interception of customers by agents assigned to operate in a different area by the same principal is entitled to obtain a compensation for damages, both of a contractual nature, by the principal, and of a non-contractual nature, by competitor agents.

In agency matters, the exclusive right, provided for Article 1743 of the Civil Code, represents a natural but not essential element of the contract; therefore, it may be legitimately waived by the parties.

Such Article 1743 c.c. provides, in particular, that the principal can not grant the right to sell its products to other agents in the same area and the same kind of business and the agent can't sell or commercialize the products of other principal in the same area and the same kind of business.

The Supreme Court, in judgment no. 14763/2022, ruled on the case of an agent who claimed compensation for damages suffered due to the infringement of his exclusive right against both the principal and agents belonging to the same principal’s sales network but assigned to other areas.

The Court of Appeal had, in fact, held that no liability could be incurred by the principal in connection with the territorial encroachment by agents from the other areas and that the behaviour of the competing agents would only legitimise individual autonomous actions of the agent.

However, as already pointed out, Article 1743 of the Civil Code, unless waived from by the parties, contractually binds the principal not to directly conclude any deal related to the company’s object and not to avail itself of the work of other agents within the area assigned to the exclusive agent.

The recent case law from the Supreme Court agrees that the breach of the exclusivity obligation is to be considered serious and, as such, may lead to the termination of the contract and the liability for damages of the breaching party.

That said, due to the fact that the parties' obligations related to the exclusivity arise from the contract and not from - indeed, as mentioned above, such obligations may be excluded by agreement - their breach cause a liability of a contractual nature for the defaulting party.

Furthermore, the Court confirmed the principle that: "the agent whose exclusivity has been harmed by the collection of customers carried out by agents appointed for a different area by the same principal is entitled to obtain a compensation for contractual damages by the principal and to obtain a compensation for non-contractual damages by the competing agents (see Supreme Court no. 26062 of 2013)".

Therefore, in the event of breach of the exclusivity right, there is also a non-contractual liability, which the agent may enforce against agents who have operated in the area assigned to him by the same principal.

In the case under consideration, therefore, upholding the agent’s appeal, the Supreme Court rejected the judgment under appeal, since the Court of Appeal, contrarily to the aforementioned principles and on the basis of an erroneous interpretation of Article 1743 of the Civil Code, held that the principal's contractual liability for breach of the exclusive right realised by the agents of the other areas could not be established.

2024 - Morri Rossetti