Commercial Contracts between Spanish Companies and Czech Partners:

Are you a Spanish company planning to do business in the Czech Republic? This article provides specific answers to your most pressing legal concerns about commercial contracts. While both Spain and the Czech Republic are EU members with civil law traditions, critical differences in legal practice and business culture can lead to costly disputes. As a leading Czech law firm based in Prague, European Union, with extensive experience advising foreign clients, ARROWS is your ideal partner.

Do you need advice on this topic? Contact the ARROWS law firm by email office@arws.cz or phone +420 245 007 740. Your question will be answered by "Mgr. Vojtěch Sucharda", an expert on the subject.

The Cultural and Legal Divide: Why Spanish Assumptions Fail in Prague

The first step to avoiding contractual mistakes is understanding why they happen. Spanish business culture often prioritizes building personal relationships and trust before finalizing business details. Contracts are frequently governed by broad principles like "good faith" (buena fe), where integrity and past conduct can be as important as the written word. This approach reflects a business philosophy where the relationship is the true foundation of the agreement.

The Czech business environment operates differently. Following the country's post-1989 "clean slate" legal development, its commercial culture has become deeply pragmatic, valuing extreme precision and mistrusting vague or idealistic language. Czech partners expect a contract to be a detailed, comprehensive roadmap that anticipates and mitigates risk. For them, the meticulously drafted contract is the foundation of the business relationship, not a mere formality that follows it.

This fundamental difference in philosophy is the source of many cross-border misunderstandings. A Spanish executive’s focus on building rapport may be seen as a distraction by a Czech counterpart eager to define obligations with precision. Conversely, a Czech partner’s insistence on detailed clauses may be misinterpreted by a Spanish company as a sign of distrust, when it is simply the standard, prudent way of doing business in Prague.

The Five Costliest Contractual Traps for Spanish Companies

Navigating this new environment requires awareness of specific legal traps. Below are the five most common and financially damaging mistakes we see Spanish companies make when drafting commercial contracts with Czech partners.

Underestimating the Power of Contractual Penalties (Smluvní Pokuta)

One of the most dangerous traps is misunderstanding how penalties for breach of contract are treated. In Spain, liability for damages generally requires proof of the loss (daño emergente) and lost profits (lucro cesante). Furthermore, liability for willful misconduct (dolo) or gross negligence cannot be contractually excluded. This creates a system where penalties are restorative and tied to actual harm.

Czech law is fundamentally different. The Czech contractual penalty, or smluvní pokuta, is a powerful and flexible tool that can secure any contractual obligation, including monetary ones like late payment. A Czech partner can legally include a clause imposing a substantial penalty for a simple one-day delay in payment, and this penalty is enforceable even if the creditor suffered no actual financial damage. Its purpose is primarily preventative and punitive.

While Czech courts can moderate a penalty deemed "unreasonably high," this requires initiating costly litigation and does not change the clause's basic validity. Signing a standard Czech-drafted contract without a thorough legal review means you are likely accepting a far stricter and more financially punitive regime than you would ever encounter in Spain.

Risks and penalties	How ARROWS helps
Crippling financial liability from a minor breach, such as a one-day payment delay, even if no damage was caused.	Contract drafting and review to ensure penalty clauses are reasonable and balanced. Need to secure your contract? Write to office@arws.cz.
Loss of negotiation leverage by unknowingly accepting a punitive, one-sided penalty regime proposed by your Czech partner.	Expert negotiation support to challenge unreasonable terms and protect your commercial interests. For immediate assistance, contact us at office@arws.cz.
Costly litigation to challenge a penalty as "unreasonably high" in a Czech court after the fact.	Proactive legal analysis to identify and mitigate these risks before you sign. Want to understand your legal options? Email us at office@arws.cz.
Damage to the business relationship when a dispute over an unexpectedly harsh penalty sours the partnership.	Drafting clear documentation that sets fair expectations for both parties from the start. Our lawyers are ready to assist you – email us at office@arws.cz.

Neglecting Mandatory Written Form (Písemná Forma)

Spanish law is built on the principle of freedom of contract form. Generally, an agreement is valid regardless of its format—verbal or written—as long as the essential elements of consent, object, and cause are present. This flexibility allows business to move quickly, with verbal agreements often being sufficient.

This assumption can be disastrous in the Czech Republic. While many simple contracts can be verbal, Czech law mandates a strict písemná forma (written form) for several critical types of agreements. The most prominent example for international trade is the Commercial Agency Agreement. Under Section 2483 of the Czech Civil Code, any such agreement that is not in writing is legally void from the start.

A Spanish company might establish a promising relationship with a Czech agent based on a verbal understanding or an email exchange, believing a valid contract is in place. In the eyes of Czech law, no contract exists. This means the Spanish principal would have no legal recourse to enforce exclusivity, protect confidential information, or claim damages if the agent fails to perform their duties.

FAQ – Legal tips about Contract Formalities

• We agreed on terms with our Czech agent over email. Is that enough?
  Not necessarily. While emails can form a contract, for specific agreements like Commercial Agency, Czech law requires a formal written document. Relying on an email chain is a significant risk. For a compliant contract, write to us at office@arws.cz.
• Besides agency agreements, what other contracts need to be in writing?
  Several, including certain real estate transactions, exclusive license agreements, and consumer credit agreements. The requirements are specific and must be respected to ensure validity. Get tailored legal solutions by contacting us at office@arws.cz.
• Can we sign a Czech contract electronically?
  Yes, but with crucial caveats. The validity depends on the type of electronic signature used, and Czech court interpretations can be inconsistent. This is a complex area where mistakes are common. Do not hesitate to contact our firm for guidance – office@arws.cz.

Misinterpreting Default Provisions and "Good Faith"

Both Spanish and Czech law are part of the EU civil law family and share concepts like "good faith." This creates a dangerous illusion of similarity. In Spain, "good faith" is a broad, flexible principle defined by courts on a case-by-case basis, often considering the parties' past behavior and the overall spirit of the agreement. Spanish businesses may intentionally leave some terms vague, trusting that this principle will ensure a fair outcome in any dispute.

In the more pragmatic Czech system, this approach is risky. While the Czech Civil Code requires parties to act fairly in legal transactions, the primary interpretive tool is always the explicit text of the contract. Where the contract is silent, the gaps are not filled by a judge's broad interpretation of fairness, but by the specific default provisions of the Civil Code.

A Spanish company that signs a sparsely worded contract, assuming the "spirit of the agreement" will prevail, is unknowingly ceding control to unfamiliar and potentially unfavorable Czech statutory rules on matters like termination, liability for defects, or notice periods. In the Czech Republic, ambiguity is not an invitation for interpretation; it is an invitation for the law to step in.

Assuming Electronic Signatures are Universally Valid

In today's fast-paced business world, electronic signatures are standard. However, their legal validity in the Czech Republic is more nuanced than many foreign companies realize. The EU's eIDAS Regulation establishes three tiers of e-signatures: Simple (SES), Advanced (AES), and Qualified (QES). While all forms are legally admissible, their strength and suitability vary dramatically.

A simple signature—such as a scanned image of a handwritten signature or a name typed at the end of an email—may be sufficient for low-risk agreements. However, for documents that legally require a written form, Czech court interpretations have been inconsistent, creating significant legal uncertainty. 

For many important transactions, such as a declaration of guarantee or certain corporate documents, a higher standard like a Qualified Electronic Signature (QES), which has the same legal effect as a handwritten signature, is required or strongly advisable.

Using the wrong type of e-signature can render a critical contract invalid and unenforceable. This is a modern-day trap that can undo an entire business deal with a single click.

Risks and penalties	How ARROWS helps
Contract invalidity due to using a simple electronic signature (e.g., a scanned image) for a document that requires a higher standard under Czech law.	Legal opinions on digital transactions to ensure your e-signing process is compliant and enforceable. Need legal help? Contact us at office@arws.cz.
Inability to enforce your rights in a Czech court because the judge rules your electronic evidence inadmissible.	Preparation of internal company policies for digital document management that align with Czech legal standards. Get tailored legal solutions by writing to office@arws.cz.
Delays and disputes with Czech authorities or partners who reject your electronically signed documents.	Legal consultations to select and implement the correct e-signature level for your specific business needs in the Czech Republic. For immediate assistance, write to us at office@arws.cz.

Using Unadapted Spanish Templates for Agency & Distribution Agreements

It is tempting to save time and money by using a standard Spanish agency or distribution agreement for a new Czech partnership. This is a critical error. Even where EU directives have harmonized aspects of commercial law, significant national differences remain.

For example, under Spanish law, agency agreements have mandatory rules regarding goodwill indemnity, termination notice, and non-competition clauses. While the Czech Republic has similar provisions, the specifics differ. A post-contractual non-compete clause in the Czech Republic, for instance, is only valid if it is for a maximum of two years and the agent receives reasonable compensation for it. A Spanish template is unlikely to include this compensation requirement, rendering the clause unenforceable.

Simply translating a Spanish contract is not enough. The agreement must be fundamentally adapted to the Czech legal context to be effective. Relying on a foreign template is like trying to use a key for a different lock—it may look similar, but it will not secure your interests.

A Strategic Framework for Dispute Resolution

Even with the best contract, disputes can arise. Having a clear strategy for resolving them is essential.

What is the Best Way to Resolve a Dispute with a Czech Partner?

Your contract must include a well-drafted choice of law and jurisdiction clause. This clause determines which country's laws will apply and where a lawsuit will be heard. The main options are Czech state courts or private international arbitration.

• Czech State Courts: As both Spain and the Czech Republic are EU members, judgments are mutually enforceable. However, court proceedings are public and conducted in the Czech language, which can create practical difficulties and add costs for translation and navigating an unfamiliar procedural system.
• International Arbitration: Arbitration is a private, confidential, and often faster alternative. The parties can choose expert arbitrators from a neutral country and conduct proceedings in English. Awards are highly enforceable worldwide under the New York Convention.

The right choice depends on the contract's value and complexity. ARROWS, as an international law firm operating from Prague, European Union, has extensive experience in both litigation and arbitration and can help you draft a dispute resolution clause that protects your interests.

How Are Spanish Judgments Enforced in the Czech Republic?

Here, the shared EU membership provides a significant advantage. Thanks to the Brussels I Recast Regulation (EU) No 1215/2012, the process is streamlined. A final judgment on a commercial matter from a Spanish court is directly recognized and enforceable in the Czech Republic without needing a separate, complex court procedure to validate it. This "free movement of judgments" is a cornerstone of the EU single market and provides a high degree of legal certainty for Spanish businesses.

Secure Your Czech Venture with ARROWS

Navigating the Czech legal landscape requires more than just good business sense; it requires expert local knowledge. The mistakes outlined in this article can lead to severe financial penalties, unenforceable contracts, and failed business relationships. ARROWS provides the bridge between your business goals and the specific demands of Czech commercial law.

Our team at a leading Czech law firm in Prague, EU, regularly helps international clients with:

• Contract drafting or review to ensure full compliance with Czech law.
• Legal opinions on complex issues like e-signature validity and contractual penalties.
• Representation in court or before public authorities in case of a dispute.
• Drafting documentation to prevent fines and penalties, including internal company policies.
• Professional training for your management on the specifics of Czech commercial and labor law.

With a portfolio of over 250 limited liability companies and a presence in 90 countries through our ARROWS International network, we combine global reach with deep local expertise.

Take the Next Step: Contact Us for a Consultation

Do not let avoidable legal mistakes jeopardize your entry into the promising Czech market. Our lawyers provide the local expertise necessary to bridge the legal and cultural gap, ensuring your venture is secure and successful from day one.

For a consultation on your commercial contracts, contact our team today. Our lawyers are ready to assist you – email us at office@arws.cz.

FAQ – Most Common Legal Questions About Czech-Spanish Commercial Contracts

• We have a great relationship with our Czech partner. Do we really need such a detailed contract?
  Yes. In the Czech business culture, a detailed contract is the foundation of a good relationship, not a sign of mistrust. It provides clarity and prevents future misunderstandings. Let us help you build that strong foundation. Contact us at office@arws.cz.

• Can we just choose Spanish law to govern our contract with a Czech company?
  You can, but it may not protect you from certain mandatory Czech laws (e.g., in consumer or employment matters). Furthermore, enforcing a Spanish law contract in a Czech court can be complex. A better approach is often a well-drafted contract under Czech law. For a strategic consultation on choice of law, email us at office@arws.cz.

• How long does it take to get a commercial contract reviewed by ARROWS?
  Our firm is known for speed and high quality. The turnaround time for a standard contract review is typically a few business days, depending on complexity. For an estimate, send your document to us at office@arws.cz.

• My Czech partner sent me a contract only in Czech. Is this normal?
  It is common, but you should never sign a contract you do not fully understand. We can provide certified translations and a full legal review to ensure your rights are protected. Don't take risks; contact our lawyers at office@arws.cz.

• What is the single biggest mistake a Spanish company can make?
  Assuming that because both countries are in the EU, the legal systems are the same. As this article shows, small differences in areas like contractual penalties (smluvní pokuta) can have massive financial consequences. Professional legal advice is not a cost; it's an investment. Get expert guidance by writing to office@arws.cz.

• Beyond contracts, can ARROWS help us set up our business in Prague?
  Absolutely. From choosing the right corporate structure (like an s.r.o.) to navigating registration and tax compliance, our team provides comprehensive support for market entry. Start your Czech venture with confidence by contacting us at office@arws.cz.