How Portuguese Businesses Should Approach Deals with Czech Partners: Contract Issues That Commonly Arise

When a Portuguese business negotiates a deal with a Czech partner, the contract may look familiar at first glance – but key details of Czech contract law, governing law, limitation periods, and penalty clauses work differently from what you are used to in Portugal or other jurisdictions.

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.

What should you clarify before signing?

Foreign businesses often underestimate how many “standard” clauses are interpreted differently under Czech law than under Portuguese or other EU laws. The most frequent issues for Portuguese–Czech contracts concern the choice of law, jurisdiction, limitation periods, contractual penalties (smluvní pokuta), language versions, and liability caps.

• Under the Czech Civil Code, many business contracts are valid only when properly executed in writing; relying on a handshake or email chain can leave you without an enforceable agreement, even if this would be sufficient in Portugal for similar deals.
• The general limitation period for commercial claims in the Czech Republic is usually three years (with some ten‑year objective limits), which is much shorter than in some other EU countries; waiting “too long” before enforcing a claim can make an otherwise strong claim legally dead. Portuguese managers used to longer limitation periods can lose rights simply by not acting fast enough under Czech law.

For tailored advice on which formalities and deadlines apply to your specific contract, Portuguese businesses can contact ARROWS at office@arws.cz.

Core pre‑signing risks

Risks and penalties	How ARROWS helps (office@arws.cz)
No written contract where Czech law requires written form – Deal considered never properly concluded; enforcement becomes difficult or impossible.	Drafting and reviewing Czech‑law compliant contracts, including correct signatures and formalities.
Relying on Portuguese‑style limitation periods – Claim becomes time‑barred under Czech limitation rules after as little as three years.	Legal audit of your claims and deadlines, plus contract clauses that adjust limitation periods where the law allows.
Undefined governing law and jurisdiction – Costly disputes just to determine which country’s court and law applies.	Clear governing‑law and jurisdiction/arbitration clauses aligned with EU rules and enforcement practice; ARROWS prepares and negotiates these clauses for you.
Missing or poorly drafted penalty clause (smluvní pokuta) – Weak enforcement tools or unexpected judicial reduction of penalties.	Structuring penalty clauses that reflect Czech judicial practice and commercial reality, so your penalties are enforceable and reasonable.

Even where the contract looks “standard”, each of these points hides technical exceptions and cross‑references to Czech and EU rules that experienced local counsel can navigate far more efficiently than an in‑house team abroad. ARROWS, as a leading Czech law firm in Prague, EU, handles these issues daily for foreign clients and can significantly reduce your risk and workload.

Which governing law and jurisdiction should Portuguese companies choose?

In cross‑border deals, two clauses are decisive: governing law (which legal rules apply) and jurisdiction or arbitration (where disputes will be heard). If you omit or copy‑paste these clauses from a foreign template, you risk parallel proceedings, higher costs, and judgments that are difficult to enforce in practice.

• EU instruments like Rome I and Brussels I bis may fill gaps when parties fail to choose governing law and forum, but the default result may be unfavourable to you – for instance, forcing you into Czech courts under Czech law when you had expected otherwise.
• Between EU parties, it is usually possible to agree both the applicable law and the competent courts (or arbitration). For many international B2B relationships, arbitration (for example at the Arbitration Court attached to the Czech Chamber of Commerce in Prague) offers a faster and more specialised forum than state courts. The key is to coordinate governing law, jurisdiction, and enforcement strategy in one coherent package.

Portuguese companies uncertain about which law and dispute forum to select for their Czech transactions can get a practical recommendation from ARROWS by emailing office@arws.cz.

Governing law, jurisdiction and disputes

Risks and penalties	How ARROWS helps (office@arws.cz)
No choice‑of‑law clause – Complex conflict‑of‑laws analysis, higher litigation costs, and unpredictable applicable rules.	Drafting clear governing‑law clauses that reflect your business priorities (Czech, Portuguese, or neutral law) and fit with EU regulations.
No jurisdiction or arbitration clause – Competing lawsuits in different countries and delayed resolution.	Tailor‑made jurisdiction or arbitration clauses, including Prague‑based arbitration or other forums, designed for enforceability and speed.
Mismatch between governing law and forum – Court or tribunal must apply unfamiliar foreign law, increasing costs and uncertainty.	Coordinated contract architecture so that chosen forum and governing law work smoothly together.
Ignoring enforcement at drafting stage – Award or judgment hard to enforce against Czech assets.	Structuring dispute‑resolution and enforcement strategy from the outset, including arbitration options and local enforcement steps.

ARROWS, an international law firm operating from Prague, European Union, routinely aligns these clauses for foreign SMEs and corporates so that if a dispute arises, you already have a clear, enforceable roadmap instead of a preliminary fight over jurisdiction.

FAQ – Legal tips about governing law and jurisdiction

• Is it safer for a Portuguese business to insist on Portuguese law?
  Not always; in many cases, using Czech law with carefully drafted protections and a neutral or arbitration forum is commercially and procedurally more efficient – ARROWS can assess this for your specific deal at office@arws.cz.
• Can we choose arbitration in Prague but apply Portuguese law?
  Yes, but this combination has pros and cons for evidence, expert costs, and predictability; ARROWS can design a balanced solution that reflects both sides’ preferences – contact office@arws.cz.
• What if we already signed a contract without these clauses?
  It may still be possible to amend the contract, or at least prepare a litigation and enforcement strategy in advance; get a quick assessment from ARROWS via office@arws.cz.

How do Czech penalty clauses, liability limits, and pre‑contractual duties differ from Portugal?

Penalty clauses and liability caps are among the most misunderstood issues in contracts between Czech and foreign partners. The Czech smluvní pokuta (contractual penalty) is a flexible and powerful tool, and Czech courts can in some circumstances reduce an unreasonable penalty, which may surprise foreign businesses counting on high penalties as their main enforcement mechanism.

• Under Czech law, contractual penalties can secure almost any obligation, including payment delays, not just non‑monetary obligations; however, if they are drafted without regard to Czech case law, they can be declared unenforceable or judicially reduced.
• Czech law also recognises pre‑contractual liability: in certain situations, a party may be liable for damages caused by breaking off negotiations in bad faith or failing to disclose relevant information during negotiations – something foreign managers often do not expect.

Liability limitation clauses must be tailored to Czech statutory rules; a clause copied from a Portuguese or English template may not have the intended effect. For a realistic risk‑allocation model under Czech law, Portuguese businesses can reach ARROWS at office@arws.cz.

Penalties, liability and negotiation conduct

Risks and penalties	How ARROWS helps (office@arws.cz)
Overly aggressive penalty clause – Czech court moderates it down, leaving you with weaker compensation than planned.	Design of penalty clauses reflecting Czech judicial practice and commercial expectations, minimising the risk of reduction.
Copy‑paste liability caps – Clause invalid or ineffective under Czech statutory limits; unexpected full liability exposure.​	Drafting or adjusting limitation‑of‑liability provisions so they work under Czech law and EU rules.
Bad‑faith negotiations or non‑disclosure – Pre‑contractual liability for damages under Czech rules.	Training and internal guidelines for your sales and negotiation teams, plus pre‑contractual documentation that reduces exposure.
Relying on verbal assurances not reflected in the contract – Difficulty proving obligations in Czech courts or arbitral tribunals.	Comprehensive contract drafting that integrates all essential commercial terms, side letters, and assurances into enforceable documents.

Although these topics may look like standard “boilerplate”, in real disputes they usually decide who ultimately bears the financial loss – which is why experienced Czech counsel should structure them from the start. ARROWS supports over 150 joint‑stock companies and 250 limited liability companies and is insured up to CZK 500 million, giving Portuguese businesses a safer way to allocate risk.

FAQ – Legal tips about penalties and liability

• Can we simply use our standard Portuguese contract template in Czech deals?
  Using foreign templates without adapting penalty and liability clauses to Czech law regularly leads to surprises in court; ARROWS adapts or fully redrafts such templates for use with Czech partners – contact office@arws.cz.
• Are “unlimited liability” clauses enforceable under Czech law?
  Not in every context, and they may interact with mandatory rules and insurance in unexpected ways; ARROWS can calibrate liability caps and exclusions to your sector – write to office@arws.cz.
• Do we really need written records of negotiations?
  Yes, especially where pre‑contractual liability or interpretation of ambiguous terms is at stake; ARROWS designs negotiation and documentation strategies for cross‑border teams – email office@arws.cz.

What practical steps should Portuguese businesses take when dealing with Czech partners?

From a Portuguese manager’s perspective, working with a Czech partner inside the EU may feel straightforward and safe. In practice, however, each “simple” step – from choosing the contract language and signing method to defining governing law, jurisdiction, penalties, and limitation periods – is linked to hidden procedural rules and exceptions that are easy to overlook without local support.

To minimise risk and save management time, Portuguese companies should typically:

• Involve Czech counsel early, before sending or signing the first draft, especially for high‑value supply, distribution, joint‑venture, IT, or real‑estate contracts.
• Ensure the contract is bilingual where appropriate, with a clear “prevailing language” clause that determines which version governs in case of discrepancies.
• Align commercial terms (payment, delivery, performance) with Czech legal concepts and terminology to avoid misunderstandings in performance and enforcement.

ARROWS, a leading Czech law firm in Prague, EU, can prepare or review your contracts, internal policies, and risk‑management procedures, and even provide professional training for your sales and legal teams that concludes with certificates for internal compliance records. For immediate assistance, write to office@arws.cz.

Why is ARROWS the right partner for Portuguese–Czech deals?

ARROWS is a large law firm based in Prague with more than 120 professionals across the Czech Republic, providing integrated legal and tax services to international clients. Through the ARROWS International network, the firm coordinates cross‑border matters in over 70–90 countries, regularly advising foreign businesses on contracts with Czech partners and helping them understand both the legal and cultural expectations on each side.

• ARROWS supports over 150 joint‑stock companies, 250 limited liability companies, and 51 municipalities and regions, and is known for speed, practical focus, and the ability to connect clients where business interests align.
• The firm is insured for damages up to CZK 500,000,000, so delegating complex or high‑value contract work to ARROWS is not only efficient but also a safer option from a risk‑management perspective.

For Portuguese companies that do not want to risk costly mistakes, missed deadlines, or unenforceable contracts, the most efficient solution is to entrust the entire Czech contractual agenda to ARROWS – from drafting and negotiation to dispute resolution and enforcement. Get tailored legal solutions for your next deal with a Czech partner by contacting office@arws.cz.

FAQ – Most common legal questions about deals between Portuguese and Czech partners

1. Which law should govern my contract with a Czech partner – Czech or Portuguese?
The optimal choice depends on the contract type, bargaining power, enforcement strategy, and sector‑specific rules; in many cases, Czech law with well‑drafted protections is both predictable and efficient – ARROWS can propose a solution tailored to your deal at office@arws.cz.

2. Is an email exchange enough to create a binding contract under Czech law?
Not always; some agreements require written form and specific signatures or corporate approvals, and informal exchanges can be difficult to enforce in practice – for a binding structure, contact office@arws.cz.

3. What happens if we miss the Czech limitation period for a claim?
The claim can become permanently unenforceable even if it would still be valid under Portuguese law, resulting in a total loss of recovery – ARROWS can map your deadlines and stop limitation “time bombs” by emailing office@arws.cz.

4. Can contractual penalties in Czech contracts really be reduced by courts?
Yes, Czech courts have the power in certain situations to reduce penalties they consider unreasonable, which can seriously affect your enforcement strategy – to structure penalties that work, reach ARROWS at office@arws.cz.

5. Do we need local Czech counsel if our in‑house team already handles international contracts?
International experience is valuable, but Czech law has local specifics and procedural traps that are difficult to master from abroad; ARROWS collaborates daily with in‑house legal teams as a specialised local partner – start the cooperation via office@arws.cz.

6. Can ARROWS also assist with wider expansion of our Portuguese business into the Czech market?
Yes, ARROWS provides full‑service support for market entry, including company formation, regulatory approvals, real‑estate and employment documentation, plus ongoing compliance and dispute resolution, all coordinated from Prague, European Union – for a comprehensive expansion plan, write to office@arws.cz.