ITALY: The Court of Cassation has enacted an interesting judgment regarding distributorship contracts.

Fabio Bortolotti | ITALY | 2010-01-18

Fabio Bortolotti

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The termination was made in conformity with the period of notice provided contractually and thus without need to provide reasons for such decision (the so called «recesso ad nutum»).
However, the distributors argued that such termination was illegal, because it would have implied an abusive exercise of the right to terminate of Renault. The Tribunal and the Court of Appeal rejected this argument by saying that a termination which respects the period of notice (recesso ad nutum) by its very nature implies that the terminating party is free to exercise this right without needing to give any reason for its decision. Consequently, the terminated party cannot object that the termination implied an abuse of right (abuso di diritto). This argument was rejected by the Court of Cassation.
According to the Supreme Court, even a termination with notice must be measured against the criteria of good faith and fair dealing. Thus, even in case a right is exercised legitimately, from a formal point of view, such exercise can imply an abuse if it is used for reasons other than its objective function. Consequently, the Court of Appeal was wrong in deciding that no control over the reasons of termination was possible, and should, on the contrary, have examined whether the termination could have given rise to an abuse of right.
Unfortunately, the Court does not mention the reasons why the distributors assumed that the termination was abusive, but makes only a very general statement of principle. It is therefore difficult to foresee what the impact of this judgment may be in the future. Finally, it is interesting to mention that the Supreme court expressly excluded the possibility of applying by analogy the provisions on agency (and particularly those relating to the indemnity) to distributorship contracts.



Fabio Bortolotti, IDI agency, distribution & franchising country expert for Italy.



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