The customer is filing a claim after the invoice due date.

Why the invoice due date doesn't matter as much as it seems

Suppliers often argue that a claim was made after the due date and is therefore late. However, under Czech legislation, the deadline for reporting a defect is not tied to the invoice due date, but rather to the moment the customer could have discovered the defect. An invoice with a fourteen-day due date and a defect that only appears after a month of operation are not chronologically related. Therefore, a claim filed after the due date can be perfectly timely, and conversely, a claim filed before the due date can be late if the customer saw the defect upon acceptance and remained silent.

The rules described in this article are based on the regulation of the purchase agreement, i.e., a typical supply of goods. In a contract for work, the provisions on the purchase agreement apply mutatis mutandis to the client's rights from defective performance (Section 2615 of the Civil Code), so the principles also apply to custom manufacturing or supply with installation. For other contract types and for contracts with their own defect liability provisions, it is necessary to proceed from their specific wording.

If the buyer fails to notify of a defect without undue delay after they could have discovered it with a timely inspection and sufficient care, the court will not grant them the right from defective performance; the same applies to a hidden defect, but no later than two years after the item was handed over (Section 2112 of the Civil Code). However, you as the seller must raise this objection, and you are not entitled to it if the defect was a consequence of a fact that you knew or must have known about at the time of delivery.

In practice, this leads to two questions you should ask yourself before rejecting a claim as late. First, when could the customer have discovered the defect with a proper inspection. Second, whether you knew about it. If the defect is obvious at first glance and the customer remained silent until receiving a payment reminder, the objection of lateness is strong. If it is a defect that only becomes apparent during use, it is weak.

The due date itself, on the other hand, determines something else: default. From its expiration, the customer is in default with that part of the price they are not allowed to withhold. A claim filed after the due date does not retroactively cancel the default; it can only, under the conditions described below, justify withholding a reasonable portion. Anyone who withholds payment without justification or to an unreasonable extent bears the consequences of default, just like a customer who does not file a claim at all.

How much the customer may withhold

The key rule is short: until the defect is remedied, the buyer does not have to pay the part of the purchase price that is estimated to reasonably correspond to their right to a discount (Section 2108 of the Civil Code). The law, therefore, does not allow withholding the entire invoice, but only the part that would correspond to a discount if the defect were not remedied. The rule protects both parties: the customer does not have to pay for what they did not receive in proper condition, and the supplier does not lose the entire price due to a defect that affects only a small part of the delivery.

This is an estimate, not a precise calculation, and it's about reasonableness. A minor defect on one of twenty delivered items does not justify withholding the entire price. Likewise, a cosmetic defect that does not limit use does not justify withholding an amount close to the value of the entire item. It justifies withholding an amount that would reasonably constitute a discount for such a defect. If the customer withholds more, they are in default with the difference, starting from the original due date. When negotiating payment, it is therefore useful to have your own estimate of a reasonable discount.

The same regulation also implies that the right to withhold is not permanent. It applies until the defect is remedied. For a defect that is an immaterial breach of contract, the buyer has the right to have the defect remedied or to a reasonable discount, and until they claim the discount or withdraw from the contract, the seller can remedy the defect by repair or by delivering a new item at their discretion (Section 2107 of the Civil Code). Once you properly remedy the defect, the reason for withholding under this rule ceases to exist; other claims that the customer has already validly asserted are not affected.

When determining a reasonable discount, the nature and extent of the defect, its impact on the value and usability of the delivery, and, depending on the circumstances, the cost of remedying the defect are taken into account — which is why the Prague-based legal team at ARROWS law firm calculates this amount with the client before the first contact with the customer, so that the supplier knows what amount they can reasonably negotiate with.

Setting off a claim against an invoice

The second path customers choose is a set-off. They quantify their claim for a discount or damages and announce that they are setting it off against your invoice. Unlike withholding, which is temporary, a set-off is intended to extinguish both claims to the extent they overlap, so its validity determines whether you will receive the withheld amount at all. The law states that an uncertain or indeterminate claim is not eligible for set-off (Section 1987 of the Civil Code).

The Grand Chamber of the Supreme Court explained what this term means, and its conclusion is less favorable to suppliers than is commonly stated. It concluded that an uncertain or indeterminate claim is generally one that is disputed as to its basis or amount and whose assertion by set-off would, instead of a clear extinguishment of both claims, provoke a dispute, and that such a set-off is generally relatively invalid (judgment of the Grand Chamber of the Supreme Court, file no. 31 Cdo 684/2020 of 9 September 2020, available at rozhodnuti.nsoud.cz).

However, the same judgment contains two caveats that matter more in practice than the legal maxim itself. A claim cannot be considered uncertain merely because the other party does not recognize it; there must be an objective uncertainty as to whether it arose, for what reason, or in what amount. And if both claims arise from the same legal relationship, for example, from the same purchase agreement, it is generally a fair arrangement for them to be mutually settable-off.

For your situation, this means that a claim for a discount due to defects in the delivery you are invoicing will generally not be considered by the court as ineligible for set-off. In the case at hand, the court overturned a decision that had labeled a counterclaim from the same contract as uncertain merely because proving it would be difficult. The supplier's defense must therefore not be based on the set-off being automatically invalid, but on the fact that the quantified claim does not correspond to the actual defect.

It also holds true that you must invoke the relative invalidity yourself; otherwise, it is not taken into account. The decisive factor is the state of affairs at the moment you received the notice of set-off; a later clarification of the claim does not change this, although the customer can perform the set-off again. Furthermore, the court considers at what stage of the proceedings the set-off appears: an objection raised at the beginning of a dispute is more likely to succeed than one that comes at the very end.

When withholding or set-off will not stand

The first situation is withholding an unreasonable amount. If a customer withholds the entire invoice for a defect that corresponds to a fraction of the price, they are in default with the difference. Here, your argument is strongest because the law explicitly speaks of a portion of the price reasonably corresponding to the discount. It is enough to compare the value of the affected item with the entire invoice, and the unreasonableness is often obvious without an expert opinion.

The second situation is the set-off of a claim from a different relationship. If a customer sets off, for example, a contractual penalty from another order or damages they have calculated themselves without supporting documents against an invoice for a delivery, the argument that the Grand Chamber granted to counterclaims from the same contract does not apply. A different contract does not in itself render the set-off invalid; the decisive factor is whether such a claim is objectively disputed as to its grounds or amount. If so, the set-off will not stand if you invoke its invalidity.

The third situation is a late notification of a defect. If the customer could have discovered the defect during inspection and only reported it months later, you can object that the defect was not reported in time, and the court will then not grant them the right from defective performance. If the objection succeeds, the customer has nothing to withhold or set off. Raise it in your first response to the claim, not in the lawsuit, to make it clear that you have not overlooked it.

The fourth situation is a defect that you have already remedied. Withholding is only valid until the defect is remedied, so as soon as you provide proof of the repair, the customer must pay the withheld amount, unless they have validly claimed a discount or withdrawn from the contract in the meantime. Whether the argument of reasonableness, lateness, or a remedied defect will prevail in your case depends on what exactly you have in the delivery notes and correspondence — which is why the case file is reviewed by the Prague-based legal team at ARROWS law firm before enforcement, not after a lawsuit is filed.

How to proceed when a customer has not paid

First, request a written quantification of what the customer is withholding or setting off, and the reason. Without a quantification, reasonableness cannot be assessed, and customers often don't have one because they are withholding "pending resolution." The request for quantification itself is often the first step that gets negotiations started. At the same time, inform the customer that you consider the part of the invoice exceeding a reasonable discount to be due and that you will enforce it.

The second step is to separate the undisputed part of the invoice. Enforce the part that clearly exceeds the withheld amount separately and immediately. You do not have to wait for the claim to be resolved, because the customer is in default with this part regardless of the outcome of the dispute over the defect. The enforcement process is discussed in the article on debt collection from A to Z.

The third step is to decide on the defect itself. If the defect is real and remedying it is cheaper than a dispute, remedy it and thus end the withholding. If you deny the defect, secure evidence of the condition of the delivery at handover, as the dispute will revolve around this. For technical defects, consider a timely independent assessment while the disputed goods are still available in their original condition.

The fourth step is to monitor the customer's creditworthiness. Withholding payments under the pretext of claims is, for some customers, a sign of payment difficulties, especially when claims are made repeatedly and always only after a payment reminder. If the customer ends up in insolvency, set-offs are governed by special rules, which are discussed in the article on set-off of claims in insolvency.

Mistakes that cost suppliers money

The most common mistake is rejecting a claim as late just because it came after the due date. If the defect was not discoverable upon inspection, this argument will not stand, and the supplier will lose time and credibility in court. The decisive moment is when the customer could have discovered the defect, and this needs to be proven, not just asserted.

The second mistake is relying on the idea that any set-off of a disputed claim is invalid. Following the Grand Chamber's decision, this is not true for counterclaims from the same contract. The defense must focus on the amount and validity of the claim, not on its formal ineligibility. A supplier who relies solely on Section 1987 will find in court that their main argument for a counterclaim from the same contract will generally not succeed.

The third mistake is waiting to enforce the entire invoice until the claim is resolved. The undisputed part lies dormant unnecessarily, and with each month, the risk that the customer will run into trouble increases. Separating it and enforcing it independently is faster and cheaper, and it also shows the customer that withholding the entire price will not achieve their goal.

The fourth mistake is a lack of documentation of the delivery's condition at handover. Without a delivery note describing the condition, photographs, or an acceptance protocol, a dispute over a defect turns into a battle of assertions. How a seller handles a claim in a typical consumer situation is shown in the article on the claim process from the seller's perspective; in a business relationship, quality documentation has even greater practical importance because it forms the basis of evidence in any potential dispute.

How strong the documentation for a specific dispute needs to be depends on the value of the delivery and the nature of the defect — which is why the Prague-based legal team at ARROWS law firm helps set it up in the delivery terms. Well-defined terms specify who inspects the delivery and when, how its condition is recorded, and in what form defects are reported, so that there is no dispute about the discovery of a defect and its timing.

The fifth mistake that appears in practice with recurring deliveries is silent tolerance. The supplier repeatedly and silently accepts the customer withholding the entire invoice for a minor claim. This in itself does not create an agreement on a different due date, but the practice established between the parties is taken into account when interpreting their contract, and the customer will invoke it in a dispute. It is therefore good practice to object in writing to any unreasonable withholding immediately.

What to check before you start enforcement

• Notification of defect: when did the customer report the defect and when could they have discovered it with a proper inspection?

• Your knowledge of the defect: did you know about the defect at the time of delivery, which would cause you to lose the objection of lateness?

• Amount withheld: does the withheld amount reasonably correspond to the discount, or is the customer withholding the entire invoice?

• Origin of the counterclaim: does the claim being set off arise from the same contract or from a different relationship?

• Moment of set-off: when did you receive the notice of set-off and what was the status of the claim at that moment?

• Remedy of the defect: have you remedied the defect and do you have proof, meaning the reason for withholding has ceased?

• Undisputed part of the invoice: how much of the invoice clearly exceeds the withheld amount and can be enforced immediately?

• Customer's creditworthiness: does the withholding of payments indicate payment difficulties that require a faster approach?

Final summary

The article has shown that a claim filed after an invoice's due date does not entitle the customer to not pay at all. Under Czech legislation, they are only allowed to withhold a portion of the price reasonably corresponding to a discount, and only until the defect is remedied. Setting off a claim for a defect is possible, and if it arises from the same contract, a court will generally not deem it ineligible. The supplier's defense is therefore mainly about reasonableness and the timeliness of the claim.

For business management, two numbers and one date are essential. The first number is the reasonable discount for the claimed defect, as this is the maximum amount the customer may withhold. The second is the difference between the invoice and this discount, as the customer is in default with this amount. The date is the moment the customer could have discovered the defect, as the timeliness of the claim is assessed from this point.

Delay does not pay off here. The undisputed part of the invoice lies dormant unnecessarily, and with each month, the risk that the customer will end up in trouble increases. Suppliers who got their money separated the undisputed part and enforced it immediately, while the defect was still being negotiated. They then conducted the dispute over the defect itself with less pressure, because most of the price had already been paid.

The Prague-based legal team at ARROWS law firm will assess the timeliness of the claim and the reasonableness of the withheld amount, evaluate the validity of the set-off, prepare a payment demand and a lawsuit for the undisputed part, set up your delivery and claim conditions, and represent you in a court dispute over the defect. Write to us at consultation@arws.cz or browse our commercial and court disputes service.