The meaning and function of termination for just cause
In an agency relationship, termination for just cause is one of the ways to terminate the relationship that can be exercised by both parties, agent and principal. This option allows for the immediate termination of the contract without notice, provided there is a reason that irreparably compromises the relationship of trust.
The fiduciary relationship, an essential element of the agency contract, requires a collaboration based on fairness, loyalty, and mutual trust.
What is meant by “just cause”
Pursuant to Article 2119 of the Civil Code, which applies to employment contracts but also applies analogously to agency contracts, just cause is behavior so serious that even a temporary continuation of the contract is intolerable. This concept is flexible and is defined on a case-by-case basis by case law, based on criteria of proportionality and severity that, however, differ from those developed in the context of employment.
Among the main examples:
- Serious or repeated breaches of contract, such as failure to transmit orders, failure to visit customers, or failure to carry out promotional activities;
- Violation of non-compete obligations, such as promoting competing products or managing parallel relationships that conflict with one another;
- Violations of fundamental contractual obligations, for example regarding territorial or product exclusivity;
Effects of withdrawal for just cause
Termination for just cause is effective immediately and does not require notice. The financial and legal consequences vary depending on who exercises the right:
- If the agent terminates for just cause, he or she retains the right to severance pay pursuant to art. 1751 of the Italian Civil Code and may obtain compensation for any further damages suffered, including those related to the failure to continue the employment relationship during the notice period.
- If the principal withdraws for just cause, the agent loses all right to compensation and may be exposed to damages claims if his conduct has caused damage.
The burden of proof
Anyone exercising the right of withdrawal for just cause must demonstrate the actual existence of the relevant conditions. Strict proof is required, based on objective and documentary evidence: emails, correspondence, documents, and technical reports can be decisive.
Case law, in analyzing disputes, applies a criterion of strict interpretation, since it concerns a hypothesis of extraordinary withdrawal with immediate cessation of collaboration.
Operational advice
Before activating a withdrawal for just cause, it is advisable to:
- Verify the validity of your arguments in light of the available documents;
- Assess the proportionality between the contested conduct and the immediate resolution;
- Consider a possible preliminary warning with an invitation to remedy the violations, where possible;
- Rely on an expert lawyer for a preliminary assessment of the matter and a proper risk analysis.
An unfounded or hasty termination can cause serious damage, including compensation and legal costs. It is therefore essential to proceed with caution, method, and qualified assistance.
Conclusion
The agency contract, founded on a relationship of trust between the parties, requires the utmost care in crisis management. Termination for just cause is a powerful tool, but it must be exercised responsibly and with full awareness of its legal and financial implications. In serious and documentable situations, it may represent the only remedy to protect the integrity of the relationship and the interests at stake.
