Distribution contracts in Italy

by Lukas Plattner

1. Premessa

1. Introduction

Unlike most commercial contracts, distribution contracts are not subject to any specific legislative regulations in Italy. This gap is filled by the supplementary action of jurisprudence which applies the provisions of laws covering types of contract assimilable to distribution contracts, in particular those on mandate and purveyance contracts. The result is a mosaic of pieces taken from various types of contract.

But, in fact, considering the many different types of distribution contracts that have grown up over the years, it is difficult to relate them to any single category.

The types differ according to how far the distributor is integrated in the supplier's system; in fact, there are contracts under which the supplier's rights are not enough to have any significant influence on the distributor's business and, vice versa, there are contracts (e.g. franchising) where the distributor is almost inseparably tied to the supplier.

2. General principles

It is advisable here to recall that all the regulations applying to commercial contracts assimilable to distribution contracts can in fact be waived and that there are two general limitations, imposed by articles 1341 and 1375 of the civil code that must be respected at the time a contract is drawn up and during its execution.

During the drawing up phase, it should be borne in mind that waivers to the legal system are considered vexatious by jurisprudence in that they can reduce the responsibility of one of the parties and, consequently, such clauses must be approved in writing, as per art. 1341 of the civil code, by the party whose contractual position is affected, unless the clauses have been negotiated between the parties.

Art. 1375 of the civil code, on the other hand, requires the parties to act in good faith, in the sense that while the contract is being made the counterpart should not be deliberately given false expectations, in other words, during execution each party must act in such a way as to protect the interests of the other.

3. The exclusive rights clause

The exclusive rights clause is usual bilateral but may also be unilateral, either in favour of the supplier: in that case the distributor is obliged not to sell rival products in the area nor to produce them him/herself for sale; or in favour of the distributor: in that case the supplier undertakes not to permit third parties to sell rival products in the same area.

Moreover, article 2596 of the civil code, which strictly regulates agreements restricting competition (form, duration, territorial area and purpose), does not apply to the exclusive rights clause.

3.2 Duration and termination of the contract

If the concession contract is for a fixed period of time the parties may not recede from it, unless otherwise specifically stipulated in the contract, but may only rescind it in the event that there is such a breach as to impair confidence in future performance (art. 1564 civil code). If the relationship is not renewed it is unlikely that the distributor could claim compensation for the loss.

If the contract is for an indefinite period the parties can always recede from it by giving adequate notice; in the absence of notice the recession is effective subject to compensation for damages (art. 1569 civil code). Notice is not necessary if there is true and just cause for recession, such as, for example, breach of the exclusive rights clause.

Another problem in the case of termination of the relationship is if the supplier is to indemnify the distributor for any loss of customers or of goodwill, in this case jurisprudence does not allow the distributor to obtain any such compensation.

3.3 Obligations of the supplier

If there is no obligation to supply the distributor, the supplier shall not be obliged to fulfil every request but an unjustified refusal could conflict with the obligation to execute the contract in good faith. In any case, the distributor cannot be held responsible for not having promoting sales when the supplier has failed to supply the products ordered promptly.

In the case of a minor breach on the part of the distributor it is considered that the supplier may interrupt supplies giving adequate notice (art. 1565 civil code).

3.4 Non-competition agreement

The purpose of a non-competition agreement is to regulate the activities of the distributor during the period after termination of the relationship; the agreement should be drawn up taking into account only provisions of art. 2596 of the civil code (form, duration, territorial area and subject).

If no non-competition agreement has been made it is considered that the distributor is free to sell the products still in his/her possession as long as this activity is not conducted in such a way as to create and erroneous impression in the public that an agency relationship still exists, otherwise the behavior of the distributor could give raise to unlawful competition punishable under art. 2598, nos. 1 and 2.

3.5 Resale price

The supplier may also fix the resale price to be charged by the distributor, this clause has been deemed lawful provided its operation is limited to the duration of the relationship to which it relates and it does not conflict with the freedom of choise of the consumer.