ITALY: Recent judgment of the Supreme Court on a distribution contract.

Silvia BORTOLOTTI | ITALY | 2012-03-15

Silvia BORTOLOTTI

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In the case at issue, a company was appointed in 1985 as commercial agent by a principal for a specific territory within Italy. The parties signed a written contract to regulate the agency relationship. At the same time, the agent company started de facto a parallel activity concerning the purchase and resale of the principal’s products.

In 1997 the principal terminated both contractual relationships with immediate effect.

The agent started a legal proceeding against the principal and, besides the claims related to the commercial agency agreement, it also claimed damages for the immediate termination of the distribution contract. The case was decided in first instance by the Tribunal of Milan, then by the Court of Appeal of Milan and finally it was brought before the Italian Supreme Court.

As far as the parallel activity was concerned, the Supreme Court first of all decided on the legal qualification of the contract. Particularly, the principal alleged that it did not enter into any distribution agreement with the agent company, but only into a seller/buyer relationship. The Supreme Court confirmed the decision of the Court of Appeal, stating that the agent company had been purchasing and reselling the principal’s products on a continuous basis for a long period of time; it had been purchasing at a price that would have been too low for a normal buyer (‘vendita sottomargine’); it had a special warehouse for keeping the supplier’s products; and it has been purchasing amounts of products even higher than the volumes sold by the principal within the framework of the commercial agency contract.

For those reasons, the Supreme Court confirmed that the contractual relationship had to be regarded not as a simple buyer/reseller relationship, but as a distribution contract, i.e. as «framework contract» («contratto quadro») whereby the distributor agrees to promote the sale of the supplier’s products which it will purchase through separate contracts of sale. As far as the termination was concerned, the Supreme Court confirmed the decision of the Court of Appeal of Milan, stating that the principal/supplier should have provided the agent/distributor with a reasonable notice for termination.

Considering that the parties did not signed any written contract for regulating their distribution relationship and, therefore, did not fix the duration of the notice period for terminating the contract, and considering the existence of a parallel commercial agency relationship between them, the Supreme Court confirmed the decision of the lower Courts, which had applied the term of notice that would have been applied in case of commercial agency contracts, i.e. six months.

Therefore, as far as the termination of the distribution contract was concerned, the principal/supplier was condemned to pay damages to the agent/distributor for an amount equal to six months of the distributor’s gross margin. Further damages requested by the agent/distributor were not granted, because the Supreme Court found that the claimant had not given sufficient evidence of them in the court proceeding.

 

 

Silvia Bortolotti, Council Member and Secretary General IDI.

 

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