Britské vs. české smlouvy

The Legal Culture Shock: Common Law vs. Czech Civil Law

In the UK, the principle of caveat emptor (“let the buyer beware”) means that what is not explicitly written in the contract generally does not exist as an obligation. This leads to lengthy, detailed agreements. Czech contracts, by contrast, are often shorter because they operate within the framework of the Civil Code, which fills in the gaps. A UK company might view a brief Czech contract as simple, when in reality it is layered with statutory provisions that are not immediately obvious.

A core pillar of Czech contract law is the principle of good faith and fair dealing (dobré mravy). This is not just a vague aspiration; it is an enforceable legal standard that permeates all legal transactions. Czech courts can, and do, invalidate contractual clauses or even entire agreements that are found to be contrary to good morals, a concept far broader than the English doctrines of unconscionability or duress.

Furthermore, Czech law recognizes the doctrine of pre-contractual liability (culpa in contrahendo). Under Section 1728 of the Czech Civil Code, parties are expected to negotiate in good faith. If one party engages in negotiations without a real intention to conclude a contract, or terminates advanced negotiations without a just cause, they can be held liable for the other party’s losses. This is a significant departure from English law, where walking away from a deal before a contract is signed rarely creates liability.

Top 3 Costly Contractual Mistakes for UK Companies

Our experience advising over 150 joint-stock companies and 250 limited liability companies shows that foreign companies, including those from the UK, repeatedly fall into the same expensive traps.

Mistake #1: Underestimating Contractual Penalties (Smluvní Pokuta)

This is arguably the most dangerous pitfall for a British company. In English law, a "penalty clause" designed to punish a party for a breach, rather than compensate for a genuine pre-estimate of loss, is generally unenforceable.

Czech law is fundamentally different. The contractual penalty (smluvní pokuta) is a powerful and fully enforceable tool. Crucially, it can be applied to secure any contractual obligation, including monetary ones like timely payment. A Czech partner can legally include a clause imposing a substantial daily penalty for a simple delay in payment, and this penalty is due regardless of whether the creditor suffered any actual damage.

A UK manager might glance over such a clause, assuming it is either a minor issue or legally invalid, as it would be at home. In reality, they could be agreeing to a punitive financial sanction that far exceeds statutory interest and can quickly escalate to a crippling sum. While Czech courts have the power to moderate an "unreasonably high" penalty, this requires litigation and does not invalidate the principle itself.

Mistake #2: Ignoring Formal Requirements for Validity and Termination

While English law values substance over form and often upholds verbal agreements, Czech law imposes strict formal requirements for certain contracts to be valid. For example, an agency agreement is legally void unless it is made in writing. A British company relying on a handshake deal or an exchange of emails for such a relationship would find it has no enforceable rights in the Czech Republic.

Termination of contracts also follows different rules. In the UK, termination rights are primarily governed by the express terms negotiated by the parties. In the Czech Republic, the Civil Code provides a framework for termination, including statutory notice periods and grounds for withdrawal, which may apply even if not detailed in the contract. Improperly terminating a contract can lead to a successful claim for damages by your Czech partner.

Mistake #3: Outdated Approaches to Dispute Resolution

Before Brexit, a clause granting exclusive jurisdiction to the English courts was straightforward to enforce across the EU under the Brussels Regulation. That automatic system is now gone. Enforcing a UK court judgment in the Czech Republic is now more complex, relying on international conventions like the Hague Convention on Choice of Court Agreements (which applies only to exclusive jurisdiction clauses) or navigating local Czech enforcement laws.

This uncertainty makes dispute resolution a critical strategic decision. For many international contracts, international arbitration is now a more reliable and efficient choice. An arbitral award is readily enforceable in the Czech Republic and over 160 other countries under the New York Convention, a system entirely unaffected by Brexit.

ARROWS: Your Legal Bridge to the Czech Republic

Navigating these legal differences requires local expertise. As an international law firm operating from Prague, European Union, ARROWS combines deep knowledge of the Czech legal environment with a clear understanding of the expectations of foreign clients. For over a decade, our ARROWS International network has provided seamless cross-border legal services in 90 countries worldwide.

We understand the pressures of international business and pride ourselves on delivering high-quality, swift advice. Our team supports over 400 corporate clients and is adept at everything from drafting bilingual contracts and providing legal opinions on enforceability to representing clients in Czech courts and international arbitration proceedings. We are not just lawyers; we are business partners who can even connect clients with mutual investment opportunities.

Conclusion: Secure Your Czech Business with Proactive Legal Strategy

Doing business in the Czech Republic offers immense opportunities, but success depends on navigating a legal landscape that is fundamentally different from that of the UK. Assuming that principles from common law will apply can lead to unenforceable agreements, unexpected liabilities, and costly disputes. Proactive legal advice is not a cost—it is a crucial investment in protecting your company’s interests.

As a leading Czech law firm in Prague, EU, ARROWS has the expertise to guide your business safely. Our English-speaking lawyers are ready to review your contracts, advise on your legal strategy, and ensure your commercial relationships are built on a solid and enforceable foundation.

Don’t let a simple legal misunderstanding derail your business in Central Europe. Contact us today for a consultation at konzultace@arws.cz.