ITALY: An interesting recent case of termination of a franchise agreement.

Silvia BORTOLOTTI | ITALY | 2014-03-17

Silvia BORTOLOTTI

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Within the framework of a reorganization of the network, in 1999 Claimants (as well as all other authorized repairers) signed a new contract of franchise with Vaillant. Such franchise agreement provides for a termination right with a notice period of 3 months.

In 2008, Claimants started a competitive activity, in breach of the franchise agreement; Vaillant challenged such violation, threatening to terminate the contract with immediate effect. However thereafter, decided to terminate the contract with Claimants by giving them the 3 months’ notice provided in the franchise contract.

Claimants sued the franchisor claiming 1.500.000,00 as damages, stating that the termination was contrary to good faith (Art. 1375 of the civil code); that is was to be deemed as an abuse of economic dependence (art. 9 of Law 192/1998) as well as an abuse of right. Moreover, Claimants argued that the letter sent by the franchisor to its customers, in order to inform them of the contract termination with Claimants, had a depreciative content. On the other hand, Vaillant claimed 1.500.000,00 as damages for having Claimants kept using its signs and trademarks after the contract termination and, therefore, for having created confusion among the customers, taking advantage of the reputation of such trademark.

The Tribunal of Milan stated that – if it was true that the termination of a 30 years’ contract with a notice period limited to only 3 months could be in principle be considered as contrary to good faith – in the case at issue, it was proved in the Court proceeding that Claimants, during the contractual period were negotiating and organizing the opening of a service centre for a direct competitor of the franchisor, which would have justified a termination without notice. Moreover, Vaillant, decided nevertheless to provide the Claimants with the 3 months’ notice and – in the opinion of the Court – it appeared to act in that sense in good faith.

In addition, the Court affirmed that it was given evidence in the Court proceeding of the fact that Claimants were able, during the notice period, to negotiate and then conclude new contracts with other main boilers manufacturers and, in addition, they took advantage of the 30 years’ contractual relationship with Vaillant in promoting themselves with new potential customers.

On the basis of the above considerations, the Tribunal of Milan rejected all the claims of the franchisee.

On the contrary, the Court decided that the circumstance (proven in the Court proceeding) that Claimants had continued using Vaillant’s trademarks and signs in their shops, cars etc. after the contract termination, was to be regarded as an illicit use of the trademark (besides being a violation of the franchise agreement), since induced the customers to think that they were still members of the franchisor’s network and therefore, by doing that, Claimants illicitly took advantage of the reputation of Vaillant’s trademark.

However, considering the specific modalities of the abuse as well as the circumstance that such illicit use lasted for a short period (less than 3 months) the amount granted to the franchisor as damage was assessed by the Court in only € 10.000,00.

 

 

Silvia Bortolotti, Council Member and Secretary General IDI.

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