The Agency Agreement under Italian Law
The agency agreement is a legal contract whereby one party (the agent) takes on the continuing task of promoting, on behalf of another party (the principal) and in return of a fee, the conclusion of contracts in a specific territorial area.
In Italy, agency agreement is ruled by Articles 1742 and following of Italian Civil Code, amended through the years by the European harmonization legal framework.
The agency agreement was originally taken from the power of attorney discipline. Although similar, the agency agreement has its own features:
- Stability: the activity carried out is not occasional, but systematic and continuous;
- Limited Area: the contract is valid only if it is specifically limited to an area of application;
- Exclusive: the principal cannot choose another agent for the chosen area and vice versa (unless expressly agreed).
Beware: the agent is limited only to promotional activity, so that the principal will be the person to actually sign the contract. However, the contract may provide for the express possibility of concluding the contract directly by the agent, in which case the rules on the power of attorney shall also apply.
Requirements and obligations
The agents must be registered in the Italian Registry of Businesses (Registro delle Imprese) if it is a company, or in the Administrative Economic Registry, if it is a natural person. Generally, a contract concluded with an unregistered agent is considered null and void.
The agents have to protect the interests of the principal, in accordance with instructions received and market conditions.
It is considered that the principal can give guidance to the agent on how to promote contracts, but he cannot completely limit his sphere of autonomy, since, in Italy, he is considered as a self-employed person.
Furthermore, the principal is obliged to pay a commission to the agent for business concluded on its behalf, even for those contracts which the principal has not concluded through its own fault.
It is also forbidden to make an agreement which makes the agent liable for the non-fulfilment of the third party.
The contract must be drafted in writing ad probationem (evidenced by writing).
International agency agreement
In the circumstance of international agency agreements, the parties in Italy can decide the applicable law; they can choose the Italian law, the law of the foreign contracting party, the law of a third State or the law of more than one State. If the parties have not decided on the applicable law, the law of the State with which the contract has the closest connection applies, which will usually be the State in which the performing party has his habitual residence.
The contract may be for an indefinite or fixed term.
The parties may terminate the contract with notice within a specified period, except in the case of just cause.
After the conclusion of the contract, the agent is still entitled to an indemnity, if the new customers are attributable to his activity or the existing customers have subsequently brought substantial benefit.
The parties may draft a written non-competition agreement, not exceeding two years, by which the agent undertakes to not operate in the same area of application of the agency agreement, in return for an indemnity.
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