The Court of Cassation, with its ruling no. 24478 of 10 September 2021, declared the stability agreement attached to the agency contract null and void for evasion. The agreement required an excessively onerous penalty for breaches. This significantly affects and restricts the right of withdrawal of one of the parties.
Facts of the case
The facts of the case originate from the decision of the local Court, which was upheld on appeal, declaring an agent’s termination to be without just cause and ordering them to pay the principal an indemnity instead of notice. The trial Court declared the stability agreement attached to the agency contract null and void. The contract required the agent to pay a penalty of €100,000 if they decided to withdraw, for whatever reason, before a specific date.
The principal appealed to the Court of Cassation against the trial Court’s ruling, arguing that the penalty was not for failure to comply with the obligation to give notice, but rather an advance payment for the damage arising from the fact that the principal had invested in a relationship which was expected to be stable. The agent challenged the appeal and both parties submitted briefs.
The Supreme Court of Cassation’s ruling
In confirming the trial court’s decision, The Court of Cassation, applied its principle according to which Art. 1750 paragraph 4 of the Civil Code, lays down the mandatory rule that notice periods must be the same for the two parties to the relationship. This is a substantive precept prohibiting agreements that alter the equality of the parties regarding termination.
In the Court of Cassation’s opinion, an agreement that is contrary to that precept (Art. 1344 of the Civil Code) an agreement that provides, in addition to the obligation to pay the indemnity for lack of notice, a penalty to be paid only by the agent who fails to comply with an obligation to give notice is void for evasion (Court of Cassation, no. 24274 dated 14/11/2006.
In this case, although the stability agreement was not formally linked to the notice obligation, in the Court’s opinion the trial court correctly ruled that it was void.
According to the Court of Cassation, the stability agreement, as structured, altered the equality of the parties regarding termination. The reason for this was that “it substantially affected the normal right of termination of only one of the parties, severely limiting it, and circumvented the mandatory principle of the equality of the parties in matters of termination.” The agreement in question had the effect of making “considerably more burdensome, for the agent, the possibility of terminating the contract by paying only the notice payment.”
The Court of Cassation dismissed the principal’s appeal and ordered the principal to reimburse the proceeding’s costs to the opposing party.
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