Executive Summary
- Our Australia-based company is involved in the tourism and travel business.
- Tour operator services and tour guide services are business opportunities that have arisen in Italy for our company.
- Package travel contracts and agency contracts are essential contracts that the company will need to enter in for it to be successful in Italy.
- Italian constitution, European Union directives, government regulations, and legislative decrees are some of Italy’s sources of contract law.
- For a contract to be enforced in Italy, there has to be an agreement between the parties, a legal cause, and an object. The cause of the contract should also be legally binding.
- Italian law provides remedies for breach of contract. Constructive remedies aim at salvaging the contractual relationship between parties. They include monetary compensation, specific performance, or alternative performance.
- Termination remedies for breach of contract are applicable when the breach of contract was deliberate or resulted from negligence.
- An agent in Italy would be necessary for the company. The agent would help identify opportunities and establish the company’s image by establishing relationships. The company would save on training costs.
- Australia does not have a free trade agreement with Italy. However, negotiations were launched in 2018 and are still underway.
- The absence of free trade agreement between Australia and Italy has implications. Reduced economic growth and efficiency in Australia are the main effects. This results from reduced economic activity, a lack of competitive advantage in Italy’s economy, and a lack of access to Italy’s technology that would improve efficiency.
- There are regulations in Italy that apply to the tourism and travel business. They are primarily based on the qualifications of tour guides and licensing. The company and tour guides should be licensed to conduct business in Italy. Other regulations on tour guides relate to legal age and education qualifications.
Introduction
Australia and Italy are developed and complementary G20 economies. The Australian government acknowledges that the two economies are complementary (Abbondanza, 2020). According to the Australian Government Department of Foreign Affairs and Trade. (n.d.), Australia and Italy are pursuing stronger political, economic, and cultural relations because of their shared values and interests. Australia and Italy’s economic ties will develop further after the completion of free trade agreement negotiations. Conducting business in Italy will become easier and more profitable for Australian businesses because there will be fewer trade restrictions.
To start a business in a foreign country, it is essential to be conversant with the laws in that country, especially contract laws, for the company to succeed. This helps identify host country contract laws that conflict with home country laws to avoid engaging in illegal business activities. According to Ford (2021), contracts are essential when running a business overseas because they give certainty and help avoid conflicts by clearly laying out each party’s rights and obligations. Ford also emphasizes the importance of contracts by stating that they provide the procedures to be followed in case one party fails to fulfill their duty. Free trade agreements are also important in international trade. They are treaties between two or more countries that reduce or eliminate barriers to international trade and investment between the countries, such as tariffs. According to Anderson and Yotov (2016), free trade agreements enhance bilateral trade and encourage investments between the countries involved. This research will focus on Italian contract law and its impact on foreign businesses in Italy, particularly the tourism and travel business, types of contracts, sources of contract law, legal requirements for forming a valid contract, and remedies to breach of contract as per Italian law. It will also address the free trade agreement between Australia and Italy.
Nature of Business and Available Opportunities in Italy
Our Australian company is a tourism and travel company that operates locally and internationally. The company offers tour operator services, including planning, scheduling, and organizing tours. The company also offers tour guide services to any traveler’s place of interest, such as historical sites and geographical destinations. Our company has identified Italy as one of the countries with numerous opportunities that align with our business. Tourism is considered to be one of the most profitable industries in Italy. According to Statistica (2022), Italy is one of the most popular travel destinations globally because of its fascinating culture, fashion, art, and stunning natural landscapes. Furthermore, Italy is the fifth most visited country globally (Marissa, 2020). Tourists usually have a hard time planning their international trips, especially regarding accommodation. As a result, our company will be involved in planning and organizing tours to Italy for tourists from across the world. Additionally, many tourists usually have difficulty identifying the places to visit. This is a good opportunity for our company to offer our tour guide services to the tourists.
Types of Contracts that the Tourism Business Would Need to Enter in Italy
The Tourism Code provided by Italian law governs contracts related to tourism. The Tourism Code maintains separate positions for the company and the travelers (Morandi, 2020). One of the contracts the tourism business would require is a package travel contract. This contract is essential as it entails information on various important aspects, such as complaint-handling procedures, dispute-handling mechanisms, and the responsibilities of the company and the travelers. It states that tourists are entitled to compensation in proportion to their holiday if the company fails to honor the contract (Bargelli, 2012). The company would also need the agency contract provided by the Italian Civil Code. The contract is essential as it lays out the company’s and agent’s rights. An article on agency contracts in Italy by Santaniello & Partners (n.d) gives examples of the contract’s requirement for the agent. It states that the agent should not work for a competing company or give discounts with the company’s authorization.
Sources of Contract Law in Italy
The Italian constitution is the primary source of contract law in Italy. The Italian Civil Code provides most of the contract rules and elements on which contract law should be based. European Union directives and regulations are also sources of contract law in Italy. The contract law has to comply with EU directives. According to EUR-Lex (2020), EU treaties provide rights and obligations for contracting parties based on their agreement, including international agreements with non-EU countries such as Australia. Government regulations and legislative decrees are also sources of contract law in Italy.
Legal Requirements for the Creation of a Valid Contract in Italy
According to TransLex Italian (2018), an agreement is the first legal requirement for creating a valid contract provided by the Italian Civil Code. The parties should agree on the terms of the contract to establish each party’s rights and obligations. The other legal requirement is the existence of a legal cause. The essence of the contract should align with Italy’s provisions and public policy. The cause should also be legally binding. For instance, a contract cannot be enforced if it involves informal promises between friends because it is not legally binding. The existence of an object is also a requirement that includes the contract’s content (TrandLex Italian, 2018). The object must be possible, legal, and determinable to all parties.
Remedies for Breach of Contract
Italian law provides remedies for breach of contract. Constructive remedies involve performance and aim at rebalancing the contractual relationship. Performance can be specific or alternative. Specific performance requires a party to perform its obligations for the other party to obtain what was initially promised (Qemali, 2022). Alternative performance requires a party to carry out their obligation, even if it means using someone else to fulfill their promise (Ficetola, 2011). Monetary remedies aim to compensate the victim of the breach. Termination remedies are applied in the dissolution of the contractual relationship. According to Ficetola (2011), Article 1453 of Italian law grants the aggrieved party the right to terminate the contract when the breach is caused deliberately or negligently. Italian judicial law also allows and provides the basis for the termination of contracts (Jentsch, 2021).
The Necessity of Appointing an Agent in Italy
It would be necessary for the company to appoint an agent in Italy for various reasons. First, the agent would help identify opportunities in Italy since the agent would have better knowledge about the Italian tourism industry. The agent would also help the company grow by establishing solid relationships with potential customers in Italy. Odiase (2019) emphasizes that appointing an agent would help the company save on the costs of training in-house employees to operate in the Italian market. The agent would not need training since they are already conversant with Italy’s labor policies, tourist attraction sites, et cetera.
Free Trade Agreement Between Australia and Italy
Australia does not have a free trade agreement with Italy. However, the free trade agreement is under negotiation through the European Union. The European Union negotiates free trade deals on behalf of its member states, including Italy. According to the Australian Government Department of Foreign Affairs and Trade (n.d.), Australia and the European Union launched free trade agreement negotiations in 2018. The lack of a free trade agreement has various impacts on Australia. One of the implications is reduced economic growth and efficiency. Trade barriers lead to fewer economic activities in Australia because of limited investment opportunities. An example of the impact is the decrease in the value of traded goods and services between Australia and Italy in 2020. The value reduced from $11.1 billion in 2019 to $7.9 billion in 2020, with the trade mainly in Italy’s favor (DFAT, n.d). Abbondanza (2020) underscores that a disproportionate trade balance favors Italy. Australia’s economic growth is also affected by the lack of competitive advantage in Italy. The free trade agreement would allow Australian businesses to have competitive prices, positively affecting the economy. Furthermore, Australia misses on the opportunity to improve production through technology transfer. According to Fratta and Sabatini (2019), Italy is at the forefront of the digital revolution and the use of industrial robots worldwide.
Regulations That Apply in Italy for a Tourism and Travel Business
An article by LawyersItaly (2020) states that Directive 2005/36/EC governs regulations for tour operators and tour guides in Italy. The regulations relate to licensing. Companies with names depicting tourism services should be licensed and qualified to operate in Italy. According to Salvadori (2020), a tour guide must also have a license to offer any services in Italy. Additionally, entities offering tourism services must be qualified in their respective fields, such as having minimum legal age and a secondary school certificate for tour guides. The Ministry of Cultural Activities and Tourism regulations require tour guides to have additional licenses to offer services in cultural heritage buildings and areas and regions regulated by the ministry’s decree.
Conclusion
Italy’s tourism industry provides a suitable environment for the Australian tourism and travel business. Since Italy is among the most popular travel destinations worldwide, there is a higher demand for services offered by our company, particularly tour operator and tour guide services. To run the business successfully in Italy, there is a need to have a package travel contract that highlights the rights and responsibilities of the company and the travelers. The contract also provides procedures for handling complaints and solving disputes. It would be necessary to appoint an agent in Italy because the agent would help identify opportunities since they are more conversant with the demands in Italy and establish business relationships. This raises the need for an agency contract that provides the responsibilities of the company and the agent. If any of these contracts are breached, Italian law provides three remedies: performance, monetary remedy, or termination.
Italian constitution is the primary source of contract law in Italy. European Union directives, government regulations, and legislative decrees are also sources of contract law. Unfortunately, there is no free trade agreement between Australia and Italy. This affects Australia’s economic growth and efficiency. There is reduced economic growth and efficiency because there are barriers to trade with Italy, reducing investment opportunities for Australian businesses. Australia’s companies in Italy also lack a competitive advantage. Efficiency is reduced because businesses in Australia cannot take advantage of technology advancements in Italy that facilitate production. A free trade agreement between Australia and Italy will develop more robust trade and economic ties between the two countries. Finally, regulations in Italy that apply to the tourism and travel business relate to licensing for the company and tour guides and the tour guides’ age and educational qualifications. Tour guides should have minimum legal age and have a secondary school certificate.
References
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