Legal Q&A · 06

Commercial Contracts — questions and answers.

35 answered questions on a subject we work on. Find related services in the catalogue: Commercial Contracts.

Answered by , Czech and Slovak attorney, admitted to the Slovak and Czech Bars (SAK 300422 · ČAK 19654).

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Questions about Commercial Contracts

  1. We withdrew from the contract because the supplier was late. Are we still entitled to the contractual penalty? Yes, withdrawal does not extinguish a claim for a penalty for delay that occurred before withdrawal. For contracts between businesses, this is expressly provided for by the Slovak Commercial Code and, in Czechia, by the Civil Code where the penalty was already due. However, a penalty for each day of delay is calculated only up to the date when withdrawal took effect, because the supplier’s obligation to perform also ends then. According to the Supreme Court of the Slovak Republic, the same applies to contracts governed by the Slovak Civil Code. However, the Court considers that a penalty triggered only by withdrawal itself cannot be awarded.
  2. We withdrew from a works contract while construction was still in progress. How much must we pay the contractor for the work completed? Under a contract between businesses governed by the Commercial Code, the amount payable is not necessarily a proportionate share of the contract price. If you own the unfinished building and the contract ended for a reason for which you are not responsible, such as the contractor’s delay, the law requires you to pay the amount by which you have been enriched through its construction. Advance payments you have already made are deducted from that amount. However, in another dispute, the Supreme Court of the Slovak Republic endorsed valuing the work performed in accordance with the contract. The outcome is therefore not certain in advance. If the contract provides for a different method of settlement following withdrawal, that arrangement takes precedence.
  3. Must an agreement be in writing to be valid? Most agreements are valid orally: Slovak law generally allows freedom of form. However, writing may be required by law, for example for property transfers, or by the parties themselves. If the prescribed written form is missing, the agreement is invalid. Amendments require a distinction between civil and commercial law: in a commercial relationship, merely signing the agreement in writing does not mean that every amendment must also be in writing. In practice, writing is recommended even where the law does not require it, for evidence and certainty.
  4. How does a contractual penalty work, and is it enforceable? A contractual penalty is a monetary sanction for breach of a contractual obligation. It is valid only if agreed in writing with a specified amount or at least a calculation method. The creditor is entitled to it even without loss, but generally cannot claim damages alongside it unless otherwise agreed. A court may reduce an excessively high penalty on application.
  5. How can I validly withdraw from an agreement? You may withdraw only if the law or the agreement permits it, rather than simply because you wish to. Under civil law, the agreement is generally cancelled from the outset; under commercial law, it terminates when the withdrawal notice is delivered, with the effects prescribed by Section 351 of the Commercial Code. In commercial relationships, the right depends on whether the breach is material, allowing immediate withdrawal, or non-material, requiring an additional period for performance to expire unused. Withdrawal must be notified without undue delay.
  6. What documents do I sign when buying a franchise? Almost never just one document. Alongside the franchise agreement, you sign acknowledgment of the operating manual, a lease or sublease of the premises and security documents, most commonly a blank promissory note with a completion agreement, personally guaranteed by a member of the franchisee company. Sometimes documents for a joint company with the franchisor are added. The package can only be assessed as a whole because the documents refer to one another.
  7. What is an agreement to enter into a future agreement, and how binding is it? The parties undertake in writing to enter into a specified future agreement by an agreed date and must agree its essential terms. If one party does not conclude it, the other may, under the Civil Code, ask the court within one year to substitute that party’s expression of intent, and may also seek damages; in business relationships, it may ask the court to determine the agreement’s content. The obligation ends if circumstances change substantially.
  8. Can the franchisor change the operating manual unilaterally? Generally yes, and appropriately so: the manual is a living document that maintains network standards. The right is not unlimited, however. Changes are restricted to what the parties agreed, and a change to the substance of the obligation or the agreed price cannot be imposed by referring to the manual. The key questions are whether the agreement allows time for implementation and who bears the resulting investment costs.
  9. Which law governs a franchise agreement between a Czech and a Slovak company? If the parties do not choose the law, the franchise agreement is governed by the law of the franchisee's habitual residence: the party taking and operating the franchise, rather than the brand owner's country. This follows from the Rome I Regulation's specific franchise rule. We therefore recommend an express choice of law; otherwise, a Slovak franchisor may discover that its Czech network operates under Czech law.
  10. When is an agreement invalid? An agreement may be invalid for several reasons: it was not made freely, seriously, certainly and comprehensibly; a party lacked capacity; or its content or purpose conflicts with or circumvents the law or is contrary to good morals. Absolute invalidity operates by law against everyone, while relative invalidity must be invoked by the affected person, for example where a party acted under a mistake. Until then, an act subject to relative invalidity is treated as valid.
  11. How can a claim be transferred to another person by assignment? A creditor can assign a claim to another person by written agreement without the debtor's consent. Ancillary entitlements and related rights pass with it. The debtor must be notified without undue delay; until then, payment to the original creditor can still discharge the debt. Claims tied to the creditor's person, exempt from enforcement, or subject to a statutory or agreed assignment prohibition cannot be assigned.
  12. Our commercial agent is taking clients after the agreement ended. Will the non-compete clause hold up? It depends on the wording. The Commercial Code permits restrictions on an agent's competing activity for up to two years after the agreement ends, within a defined territory or for a defined group of customers there. A clause targeting your customer base has prospects of enforcement; a blanket prohibition on doing business may be restricted or declared invalid by the court. Do not confuse this with an employee non-compete, which has separate, stricter requirements.
  13. When do our standard terms actually become part of the agreement? When the other party knows them or received them with the proposed agreement. The Commercial Code permits part of an agreement's contents to be set by reference to standard terms, but only if the parties know them or they are attached to the offer. In a dispute, the party relying on them must prove this. Publishing them online alone is insufficient. Every agreement and order should identify the terms precisely and confirm receipt; if both parties exchange their own terms, the conflict must be resolved expressly.
  14. Our agreement is in Slovak and English. Which version applies if the texts differ? It is advisable to designate the prevailing text expressly, but statutory rules and the dispute forum must always be considered. Under Section 8(5) of the State Language Act, the state-language version of an agreement applies in the event of ambiguity or inconsistency in proceedings before the authorities and legal entities specified in Section 3(1). Outside this specific rule, the agreement's meaning is assessed under the governing law and applicable interpretation rules; expert examination of the translation is not automatically required.
  15. How do we sell goods with retention of title so we do not lose them before payment? Agree it in writing in the sale agreement, framework agreement or properly incorporated standard terms. Without it, the buyer acquires ownership on delivery, leaving you only a claim if payment is not made. Retention keeps ownership with you until full payment, especially valuable in the buyer's bankruptcy. Risk of damage still passes on receipt regardless of retained title, so also require insurance and prohibit further disposal.
  16. Our commercial agency agreement has ended. Is the agent still entitled to commission on later transactions? Possibly. The Commercial Code grants commission after termination where a transaction results mainly from the agent's activity and takes place within a reasonable period, or where the third party's order arrived before termination. This rule can be varied or excluded by agreement. Alongside it, however, the indemnity under Section 669 is mandatory and cannot be waived in advance. The agent must assert that right within one year of termination.
  17. As a self-employed contractor, I signed a three-year non-compete. Is it enforceable? A three-year clause carries a serious risk of invalidity, but the outcome depends on the true nature of the cooperation, the restriction's scope and its proportionality. The two-year limit in Section 672a applies directly to commercial agency; courts have applied its criteria by analogy to other agreements in particular cases. It is therefore unsafe to claim that every three-year non-compete imposed on every self-employed contractor is automatically invalid. The securing penalty and whether the cooperation was actually dependent work must also be examined.
  18. The other party wants an ‘irrevocable’ power of attorney as security for the deal. Can we give one? You can grant it, but the ‘irrevocable’ element will not work: a principal cannot validly waive the right to revoke authority at any time. A power of attorney is therefore not a security instrument, and a structure allowing the other party to transfer your assets to itself on default also comes dangerously close to prohibited appropriation of collateral. Protect the transaction through escrow, a pledge or conditions in the agreement itself.
  19. My company is buying from a private individual. Does consumer law protect the seller against me? Merely designating a private individual as the seller does not exclude consumer protection. The general definition in Section 52 of the Civil Code asks whether the trader acts in the course of business and the individual outside it; status is not determined solely by who pays the price. Specific rules on consumer sales, withdrawal rights or information duties may, however, have a narrower scope. Each agreement and each rule must therefore be assessed separately when purchasing from individuals, without assuming either full protection or its complete exclusion.
  20. I am buying a car from Czechia. What should I check, and what must the agreement contain? First check the car in Czech registers using its VIN: technical data and inspection mileage, police theft alerts, insurance claim history, and whether the seller really owns it rather than a finance company. Then check the seller, particularly enforcement and insolvency. The agreement should contain representations about origin, condition and third-party rights, the exact transfer of ownership and risk, governing law and the court. Slovak registration requires recognition of the individually imported vehicle; if it is new under VAT law, VAT is paid in Slovakia.
  21. We paid a deposit under an agreement to enter into a future contract. Will we get it back if the deal falls through? Generally yes. Anything you pay before a contract is concluded is, under Section 498 of the Civil Code, an advance on the future price; if the future contract does not arise, the legal ground for the payment falls away and the other party must return it as unjust enrichment. It may retain the payment only to the extent that it has a claim of its own against you, typically under a contractual penalty or agreed withdrawal payment, or for damages if you frustrated the deal.
  22. We developed the patent jointly with a partner. What may each of us do without the other's consent? Unless you have agreed otherwise, each co-owner may exploit the invention themselves, regardless of the size of their share. A licence to a third party may be granted only with the consent of all co-owners, in Slovakia as well as in Czechia. Because the statutory rules favour whoever has the manufacturing capacity, exploitation, licences, fees and exit from the project belong in the agreement between the partners.
  23. An invention in a joint project was created by our employee. What must we do for it to belong to the company? The right to a solution created by an employee in the performance of employment duties belongs to the employer, unless otherwise agreed, but the company must assert it in time. The employee must notify you of the invention in writing, and you then have three months to assert the right in writing or file an application; otherwise the right passes to the employee. An employee whose invention is claimed is entitled to reasonable remuneration.
  24. We are running a project with a Czech university funded from Czech public support. Who will own the results? Unless the project is a public contract, rights to the results belong to the recipient of the support under Section 16 of Act No. 130/2002 Sb. Where a company and a research organisation are joint recipients, the statute offers three models: the research organisation keeps the rights to its own results, the rights are divided according to the extent of participation, or the company pays a market price for them. The model must be chosen in the agreement between the partners and aligned with the funding provider's terms.
  25. Is a non-disclosure agreement confirmed by email or by a click in a data room enough? The confidentiality undertaking itself may be formed by email or by a click, because neither Slovak nor Czech law prescribes any particular form for it unless the parties have reserved one. In Slovakia, however, the contractual penalty on which an NDA usually rests may be agreed only in writing. An electronic act satisfies the writing requirement if it captures the content and identifies the person who acted; a qualified electronic signature always satisfies it. For an NDA governed by Slovak law we therefore recommend a signature, and where a click is used, at least a reliable record of who confirmed which wording.
  26. The recipient under our NDA wants to show our information to its advisers and subcontractors. Who is liable if they leak it? A non-disclosure agreement binds only those who entered into it; the recipient's adviser or subcontractor is not bound by it. A recipient who passes the information to someone outside the permitted circle breaches the NDA themselves. Where the recipient performs their obligations through another person, they are liable under Section 331 of the Commercial Code as if performing themselves; that rule will not, however, apply reliably to every type of adviser. The NDA should therefore deal expressly with the circle of third parties, how they are bound and the recipient's liability for them.
  27. The other party returned our contract template with changes it did not mark. Is what we signed binding? Generally yes. Under Slovak law, a reply that adds changes to your offer is a new offer, and whoever signs it accepts it together with the changes they overlooked. A defence is available only exceptionally, where the other party caused the mistake or must have known of it; invalidity must be invoked and the circumstances proved. Comparing every returned version against the approved template before signing is more reliable.
  28. There is an ambiguous provision in our contract template. Will a court construe it in our favour? Probably not. A court first looks for the parties' intention and the usual meaning of the expression, taking account of the negotiations and past practice. If doubt remains, an expression allowing different interpretations is construed against the party that used it first in the dealings. With your own template that party is usually you, in Slovakia as well as in Czechia.
  29. Our salesperson signed a contract on terms our internal template does not permit. Is the company bound? Generally yes. A person entrusted with a particular activity in the operation of a business is authorised to carry out all the acts that ordinarily occur in it. Where they exceed that authorisation, the company is not bound only if the partner knew or could have known of the excess. An internal instruction to sign only the approved template therefore protects the company externally only where the partner is aware of it.
  30. May our commercial agent also represent a competitor during the term of our agreement? If you have agreed neither exclusivity nor any other prohibition, then generally yes. Under a non-exclusive agency the Commercial Code allows the agent to carry on the same activity for other persons; under an exclusive agency they may not do so within the agreed scope, and a breach entitles you to withdraw from the contract. Even a non-exclusive agent, however, is bound to have regard to your interests and not to misuse the information obtained from you.
  31. We want to end a mandate contract. When does the notice take effect and what must we pay the mandatary? As the mandator you may terminate a mandate contract under the Commercial Code at any time, in whole or in part; unless the notice specifies a later date, it takes effect on the day the mandatary learned or could have learned of it. The mandatary is, however, entitled to reimbursement of necessary and purposefully incurred costs and to a proportionate part of the remuneration for the activity properly carried out until the notice takes effect. The mandatary may also terminate, but their notice takes effect only at the end of the calendar month following the month in which it was delivered to you.
  32. We gave goods to a commission agent to sell. Who owns them until they are sold, and what if the buyer does not pay? The goods remain yours until a buyer acquires them; the commission agent does not become their owner. The agent, however, concludes the contract with the buyer in their own name, so you generally have no direct rights against the buyer, and an unpaid price must be enforced by the agent for your account or the claim assigned to you with your consent. The agent guarantees payment by the buyer only where they have undertaken this in writing or have breached your instructions as to whom to contract with.
  33. Will contracts concluded before the new Civil Code takes effect be governed by the new statute? Under the government bill, generally not. Relationships arising from contracts concluded before the effective date, including the consequences of their breach, are to continue to be governed by the existing legislation; the parties will, however, be able to agree in writing that their relationship moves under the new statute. This is a bill that the National Council has not yet passed, and today both the Civil Code and the Commercial Code apply in their existing wording.
  34. What will change for leases of business premises under the new Civil Code bill? The government bill repeals Act No. 116/1990 Zb. on the lease and sublease of non-residential premises and replaces it with a lease of business premises set out directly in the Civil Code. It expressly regulates indexation of rent, the monetary deposit and the landlord's lien, and allows compensation for the customer base to be agreed on termination. Until the National Council passes the bill, Act No. 116/1990 Zb. applies, and leases concluded before the effective date would, under the bill, remain governed by the existing legislation.
  35. What will change for commercial agency agreements under the new Civil Code bill? Under the government bill, commercial agency would be governed by the new Civil Code and would continue to follow the European directive on commercial agents. The rules on commission, notice periods and non-compete clauses remain similar at their core, but the indemnity would be renamed special remuneration with a new ceiling where the cooperation lasted less than a year, and the bill expressly lists the terms that would be invalid or that would be disregarded where they operate to the agent's detriment. The bill has not yet been passed, today's agreements are governed by Section 652 et seq. of the Commercial Code, and the obligations part of that Code is to be removed only by a separate implementing amendment.

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