International contracts: duration and termination

Three modalities of termination for the non-fixed-term contract

Luca Davini
Lawyer in Milan and Turin


On the duration and termination of the relationship, in general terms the valid principles of the company are eligible. The distribution contract of open-ended duration can be terminated:

– Ad nutum, with congruent notice;

Immediate termination for reasonable cause or through breach of contract;

– With the express avoidance clause.

On the compliance of a congruent term of notice, one of the most relevant aspects is the identification of its duration. The parties are free to contractually determine the notice to be respected to withdraw from the contract. In this case, the jurisprudence tends to refer to this, even when the term is rather short. For example, a judgement of the Tribunal of Turin of the 15th of September 1989 considers 15 days as being sufficient.

Lacking an express agreement, it is required to refer to the jurisprudential orientations, according to which in order to withdraw unilaterally, it is required to respect a reasonable term of notice (applying in an analogical way the article 1569 of the Civil Code on the supply of goods or the article 1725 on the contract of mandate which require a “congruent notice”), indicated in three, four and six months according to the duration of the contract and the circumstances.

In alternative to the term of notice, the parties are free to agree on a clause which provides the payment of a reasonable sum of money to the distributor, replacing the notice.

Another hypothesis regards the cases of immediate withdraw for reasonable cause or of breach of contract, but only if the non-performance of the party has remarkable importance and it is such as to damage the trust in the exactness of the subsequent performances.

An additional valid alternative is the provision in the contract of an express avoidance clause (which, though, will not be valid, if concerning all the obligations provided in the contract) which in general terms contains elements of the immediate withdraw and discharge for cause.

As for the fixed-term sales concession contracts, the withdrawal ad nutum is not admitted (unless it has been expressly agreed upon), while the jurisprudence recognizes the possibility to resort to the withdrawal for reasonable cause.

In the cases of non-compliance with the term of notice contractually agreed on or of a congruent term as individuated above, the Judges may set up on the supplier/producer a responsibility for damages produced to the distributor for the anticipated withdrawal without notice: they are calculated according to the profits that the distributor would have made in the period of notice and to the expenses supported from the same for the organisation and promotion of the sales in anticipation of the longest duration of the relationship (non-recoverable investments, stock of products).

In all the cases in which the contract is going to terminate for withdrawal in respect of the legal and contractual terms of notice or for the running of time, the majority of the legislations, including the Italian one, does not recognize to the distributor the right to any kind of allowance or compensation for the customers contributed to the supplier, unless for some important exceptions, as we will see in the next paragraph.  

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Marcello

Dear Aurelia, the information you have provided are not sufficient for an answer which is subject to a professional engagement. In any case, we should study the provisions of the contract and identify governing law of the contract.If it does not provide anything on governing law then conflict law shall apply (in the most part of the countries likely the governing law will be the law of the country where the agent is domiciled). best regards Marcello Mantelli

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Aurelia

I signed a contract with a fashion agency but there were no termination clauses in the contract and decided to withdraw it before one week after signature so sent them an email but after 14 days they sent me an email and asserted that because i didnt withdraw in legal deadlines i have to perform the contract and pay whole money.Noboday told me about any deadlines and nothing was in the contract!! Why did they claim such a thing?

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