The Italian Court of Cassation recently ruled on the complex issue of the reimbursement of premiums paid to agents following the early termination of the contract on initiative the agent, regardless of the reason for termination.
The dispute was originally been pending with the Court of Naples.
Said local court had ruled in favour of the principal claiming for the reimbursement of a portfolio bonus granted to an agent who had terminated his contract for just cause before the 36-month duration provided for in the contract.
The court based its decision on the interpretation of a specific contractual clause providing for the obligation to reimburse the bonus in the event of early termination of the contract.
The competent Court of Appeal, however, upheld the agent’s appeal and overturned the decision of the First Instance Court, stating that the above-mentioned contractual clause was not applicable because the agent had been forced to terminate the contract due to the illicit conduct of the principal towards him.
to the principal logged an appeal against this ruling of the appeal court with the Court of Cassation, contesting the interpretation of the disputed clause by the Court of Appeal stating that it was contrary to the literal meaning of the clause and the real intention of the parties.
With decision no. 5281 of 28 February 2024, the Court of Cassation dismissed the principal´s appeal, confirming the correct application of the legal principles relating to the criterion of preservation of the contract by the Court of Appeal had correctly applied.
In particular, according to the Court of Cassation, when interpreting contractual clauses, it is important to take into account hermeneutic criterions (pursuant to art. 1367 of the Civil Code), under which the wording of the contract as a whole or the individual clauses must be interpreted in such a way as to preserve some effect and to avoid interpretations that would render the clauses unenforceable. This principle, however, does not allow an interpretation that replaces the real intention of the parties and, in the event of uncertainty, the court must avoid adopting a solution that would render the contract null and void.
According to the Court of Cassation, the Court of Appeal had correctly interpreted the term “initiative” contained in the text of the contractual clause in order to preserve the effects of the contract, presuming a decision or free and voluntary act on the part of the agent, uninfluenced by the principal’s unlawful conduct.
In conclusion, this decision of the Supreme Court provides fundamental clarifications on the interpretation of contractual clauses in agency contracts and on the application of the principles of preservation of the contract in the Italian legal system.