Legal Q&A · 06

Commercial Contracts — questions and answers.

18 answered questions on a subject we handle every day. 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. 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.
  2. 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.
  3. 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.
  4. 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.
  5. 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, within one year, ask the court to substitute that party's expression of intent, and may also seek damages. The obligation ends if circumstances change substantially.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. 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.
  13. 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.
  14. 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.
  15. 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.
  16. 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.
  17. 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.
  18. 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.

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