The application of just cause under Section 2119 of the Italian Civil Code to agency relationships.

25 October 2022

The employment relationship of agents has long been the focus of the scholars’ debate regarding its actual nature. Today, while there is an apparent agreement on the framing of the same within the autonomous work, clashes remain heated over some specific elements, one of which concerns the possibility of terminating the relationship for cause under Section 2119 of the Civil Code, which is better analysed in the present discussion.

Pursuant to Section 1453 of the Italian Civil Code (related to the termination for breach of contract), in contractual relationships in which one of the parties defaults against the other concerning the obligations arising from said relationship, the fulfilling party is given the right to withdraw from the relationship. In cases of this kind, the section at issue provides that, following such an event, the contracting party in respect of whom the default has occurred may demand that the obligation be nevertheless carried out even though the terms initially established may have been exceeded and where it is still in their interest or proceed with the demand for termination of the entire contract, with the consequent right to compensation for the damage suffered as a consequence of the default. 

Alongside this type of protection, both scholars and the settled caselaw are now in agreement in affirming the possibility of applying to agency relationships, by analogy with those of a subordinate nature, also the remedy available under Section 2119 of the Italian Civil Code, by which the contracting party who has not received the proper performance of the obligation, is entitled to terminate the contract without notice to the other party provided that, given the nature of the relationship between them, the breach is so severe that it can be identified as a valid ground for termination for "just cause."

Although, as mentioned, the case law has already pacifically recognised the applicability of this provision to agency relationships, it is good to examine the particular meaning that has been given in various decisions to the termination for just cause in such relationships.

As mentioned, the agency relationship cannot be framed within the subordinate employment to which the provisions of Section 2119 of the Civil Code apply. The stringent fiduciary bond that ties the principal with the agent justifies its application to the relationships under consideration. This entrustment towards this professional determines that for a just cause for the termination of such a relationship to take place, the conduct put in place by one of the parties must be so severe that it is capable of breaking, in an irrecoverable manner, the relevant fiduciary relationship.

Even the Italian Supreme Court (see decisions nos. 22285/2015 and 11728/2014), referred to by the most recent decision of the Court of Milan (Sec. XI, no. 820/2022), has clarified that in the agency contract, the relationship of trust has "greater intensity than in the subordinate employment relationship"; this is due – as the Court states – to the higher degree of autonomy the agents enjoys in achieving the objectives set out within the contract that defines the terms of their employment relationship.

Given the independence and autonomy of the agents as well as the absence of constraints in the management of their activities, typical of the role held by the agents vis-à-vis the principal who employs them, the conduct performed by the latter has a different weight compared to the same one carried by an employee - whose work performance: is less autonomous and, therefore, has a potentially lower capacity to cause harm to the other party.

For the agents, therefore, the reliance on the fact that they engage in conduct that is measured and valid concerning the recognised autonomy implies that there is an expectation of greater trust, which, therefore, runs the risk of a higher frequency of being disregarded, with the consequence of the permanent termination of the relationship.

Finally, in the abovementioned decision, the Court of Milan continued its examination of the rules of evidence regarding the seriousness of just cause in the agency relationship, such as to justify its immediate termination. More specifically, pursuant to Section 2697 of the Italian Civil Code, the court confirmed that it is up to the terminating party to provide evidence of the existence of the just cause itself and, therefore, "of the specific wrongful act and/or failure to perform the duties placed in support of the just cause," again referring to various decisions of the Supreme Court.

In conclusion, in light of the above, the application of Section 2119 of the Italian Civil Code to the agent's employment relationship is undebated. However, it may be used considering values significantly different from those typical of its application to the subordinate employment relationship. This differentiation, however, does not affect the burden of proof of the existence of cause, which follows the ordinarily applicable provisions, including Section 1218 of the Italian Civil Code, under which where the termination is based on a breach of contract by the other party, the party claiming any related compensation for the damages is required to prove the existence of the source (legal or negotiated) of the obligation allegedly unfulfilled, leaving its counterparty with the burden of proving its own exact performance.

2024 - Morri Rossetti