North Macedonian Businesses Working with Czech Partners: Contract Risks and Common Pitfalls

Mgr. Vojtěch Sucharda
Mgr. Vojtěch Sucharda
14.3.2026 | ARROWS law firm

When North Macedonian companies establish commercial relationships with Czech partners, they often assume that basic contract principles are universal. They are not. Czech contract law operates under fundamentally different principles than Macedonian law, and this misalignment creates predictable, expensive, and sometimes catastrophic legal problems. This article provides specific answers to the mistakes your company is most likely to make—and how to avoid them before signing.

Picture illustrates a specialist consulting about Czech contract law differences.

Understanding the fundamental differences between Macedonian and Czech contract law

North Macedonian companies entering Czech markets frequently rely on their existing contract templates, developed for use with domestic partners or other Balkan businesses. This approach is high-risk. Czech law follows a civil law tradition governed by the Czech Civil Code, which imposes mandatory requirements that Macedonian contract templates simply do not address.

The most critical distinction is that Czech law operates on principles of autonomy of will combined with strict adherence to mandatory statutory provisions. This means that while parties enjoy significant freedom to negotiate contract terms, they cannot opt out of certain protective principles established by law.

One of these is the principle of good faith ( poctivost and dobrá víra ), which permeates all Czech contractual relationships. Good faith in Czech law is fundamentally different from how it functions in Macedonian legal doctrine. In Czech jurisprudence, the principle of good faith is not merely a general interpretive guideline; it is an affirmative legal obligation that can create duties and liabilities not explicitly written in your contract.

A Czech court may find that you breached your contractual duties through conduct that technically complies with the contract's explicit terms but violates the principle of good faith. This creates unexpected exposure for North Macedonian companies accustomed to more literal, text-based contract interpretation. The consequence is profound: you may believe you are fulfilling your contractual obligations when a Czech court determines otherwise.

ARROWS Law Firm regularly handles disputes arising from this exact misunderstanding, and their lawyers understand the nuances of both the Macedonian and Czech legal frameworks. This allows them to bridge this critical gap when negotiating and drafting contracts for international clients.

The hidden danger: The smluvní pokuta and Czech contractual penalties

Of all the legal traps awaiting North Macedonian companies negotiating with Czech partners, the most financially dangerous involves misunderstanding how Czech contractual penalties ( smluvní pokuta ) function.

Under the Czech Civil Code, a smluvní pokuta is a pre-agreed financial amount that one party pays to the other upon breach of contract. The critical distinction is this: a Czech contractual penalty is enforceable even if the creditor suffered no actual financial damage from the breach.

In Macedonian law and many other systems, a penalty clause must be proportionate to actual or anticipated damages. In the Czech Republic, the mere fact of the breach triggers the full penalty obligation, regardless of whether the breach caused measurable harm to the other party.

Consider a practical example: a Czech supplier includes a clause stipulating a penalty of 0.5% of the total contract value for each day of late payment. A ten-day delay in payment—even if caused by administrative delays on your end—triggers a penalty equal to 5% of your entire contract value.

For North Macedonian companies, this creates an unexpected and often devastating liability exposure. Your company might assume such a clause is either unenforceable or negotiable. It is enforceable. Czech courts will enforce it without requiring proof of actual damage.

The only moderating mechanism available is judicial moderation. Under the Czech Civil Code, courts possess the authority to reduce penalties they deem "disproportionately high" ( nepřiměřeně vysoká )—but this reduction is discretionary. The safer approach is proactive contract drafting that avoids excessive penalties in the first place.

North Macedonian companies often fail to scrutinize penalty clauses because they underestimate their enforceability. ARROWS Law Firm helps international clients review and negotiate penalty clauses to ensure they are both legally enforceable and commercially reasonable, protecting your interests before disputes arise. Write to office@arws.cz to have your existing contracts reviewed by specialists with deep experience in Czech commercial law.

1. Can a Czech court reduce a contractual penalty even if both parties agreed to it?
Yes. Czech courts possess authority to moderate penalties deemed disproportionate to the breach. However, relying on this is risky—the court's decision is unpredictable and litigation is expensive. Better to draft reasonable penalties from the start.

2. What happens if the penalty clause is missing from our contract with a Czech partner?
You lose your contractual penalty enforcement mechanism entirely. You would need to prove actual damages in court, which requires evidence, expert testimony, and time. A well-drafted penalty clause is simpler and faster to enforce.

3. Can we exclude penalty clause enforceability by writing it into our contract?
No. Under Czech law, you generally cannot validly waive the right to judicial moderation in advance. However, parties often attempt to limit the penalty to a fixed cap to reduce the likelihood of court intervention.

Formal requirements and the validity trap: When your contract simply does not exist

North Macedonian companies regularly underestimate the importance of formal requirements in Czech contract law. While Macedonian law permits flexibility regarding contract formalities—allowing verbal agreements to be binding in many commercial contexts—Czech law imposes mandatory written form requirements for specific contract types.

The most dangerous example is the commercial agency agreement ( smlouva o obchodním zastoupení ). Under Section 2483 of the Czech Civil Code, a commercial agency agreement must be executed in writing to be legally valid.

This means a North Macedonian company that establishes a relationship with a Czech agent based on verbal understanding has no legal contract. The agent can walk away without consequence. More critically, the company has no legal basis to enforce exclusivity, protect confidential information, claim damages for breach of agency duties, or prevent the agent from working for competitors.

The problem extends beyond agency agreements. Czech law requires written form for several categories of contracts, including real estate transfers and certain license agreements. North Macedonian companies that assume that informal documentation creates binding agreements are exposed to catastrophic business risks.

Practical complexity arises because the requirement of written form in Czech law does not mean what it means in Macedonian law. In Czech jurisprudence, "written form" ( písemná forma ) typically means a document with signatures of both parties.

While electronic communication can satisfy this requirement if it guarantees the identity of the acting person and the integrity of the data, simple emails may not suffice. Simple emails without advanced electronic signatures may not always suffice for contracts where the law strictly demands written form.

ARROWS Law Firm specializes in contract drafting for international relationships, including with North Macedonian partners. Their lawyers ensure your commercial agreements comply with Czech formal requirements while protecting your commercial interests. If you have existing relationships with Czech partners based on informal arrangements, contact office@arws.cz to assess whether your agreements are legally enforceable.

The knock-out rule: How your standard terms simply disappear

North Macedonian companies typically develop standard terms and conditions over years of domestic business practice. When expanding into Czech markets, they naturally adapt these templates for use with Czech partners. They assume their carefully drafted terms will govern the commercial relationship. Under Czech law, they may be wrong.

Czech law applies the "Knock-Out Rule" when parties exchange conflicting standard terms and conditions. Under this rule, any clauses in the parties' respective terms that contradict each other are automatically nullified—they are "knocked out" and simply do not apply to the contract.

The consequences are profound. Your company sends its carefully drafted terms containing liability limitations, specific warranty disclaimers, or detailed payment procedures to your Czech partner. The Czech partner responds with their own contradictory terms. Under the Knock-Out Rule, both sets of conflicting provisions are eliminated entirely.

This creates a legal vacuum. The contract remains binding based on agreed-upon core elements (price, quantity, delivery terms), but the conflicting provisions simply vanish. This vacuum is then automatically filled by default provisions of the Czech Civil Code—provisions that typically offer less protection than your original terms.

For example: your company's standard terms include a liability cap of 100,000 CZK. Your Czech partner's terms include unlimited liability. Under the Knock-Out Rule, both provisions are eliminated. The contract now contains no liability cap, and statutory liability applies instead. Your carefully negotiated protection has disappeared entirely.

The Knock-Out Rule can be expressly excluded, but only within the main body of the contract itself—not in your standard terms. This requires sophisticated contract drafting that explicitly states that the parties' standard terms are excluded, and that a unified main contract governs the entire relationship.

ARROWS Law Firm handles commercial negotiations with Czech partners as a regular part of its practice. Their lawyers draft contracts that exclude the Knock-Out Rule, incorporate your protective terms, and ensure that your company's commercial interests are legally secured under Czech law. If you are negotiating contracts with Czech partners, write to office@arws.cz to have our specialists review your draft terms.

1. If my Czech partner doesn't object to my standard terms, do they automatically apply?
No. Even silence or passive acceptance does not prevent the Knock-Out Rule from applying if the Czech partner's terms contradict yours (so-called "battle of forms"). The rule operates by operation of law.

2. Can we avoid the Knock-Out Rule by stating that our terms apply in our contract?
Partially. You can exclude the Knock-Out Rule through explicit language in a main unified contract. However, simply writing it into your standard terms is legally ineffective. Professional drafting is necessary.

3. What should we do if we discover our liability cap disappeared due to the Knock-Out Rule?
This situation requires immediate legal intervention. Depending on the specific contract and circumstances, remedies may be available. Contact ARROWS Law Firm specialists at office@arws.cz for assessment of your situation.

Damages, liability, and the absence of "consequential loss"

North Macedonian companies often include clauses in their contracts excluding liability for "consequential loss," "indirect loss," or "lost profits." These terms have specific meaning in Macedonian law and Anglo-American legal systems. They do not have equivalent meaning in Czech law.

The Czech Civil Code does not recognize the concepts of "consequential loss" or "indirect loss" as meaningful statutory categories. Instead, Czech law compensates "actual damage" ( skutečná škoda ) and "lost profit" ( ušlý zisk ). To claim damages for breach of contract under Czech law, a party must establish a direct causal link between the breach and the harm suffered.

This creates a critical problem: your company's standard liability exclusion clauses regarding "indirect loss" may be interpreted as ambiguous or legally meaningless under Czech law. A Czech court might ignore your contractual exclusion of undefined "indirect" damages and apply statutory law instead. This leaves your company exposed to liability types you intended to exclude.

Additionally, Czech law distinguishes between contractual liability and tortious (delictual) liability. A breach of contract can trigger liability exposure that extends beyond the contract's express terms. Your contracts require Czech-specific drafting that addresses liability allocation in terms that Czech courts will recognize and enforce.

ARROWS Law Firm, a leading Czech law firm based in Prague, European Union, assists international companies in drafting liability and damages limitation clauses that function effectively under Czech law. ARROWS Law Firm's lawyers draft clauses specifically designed to allocate risk and limit liability in compliance with Czech legal principles. Contact office@arws.cz to discuss liability protection for your Czech commercial relationships.

The statute of limitations: When your right to sue simply expires

North Macedonian companies may be accustomed to longer timeframes for pursuing commercial claims. In Macedonia, various limitation periods apply depending on the type of claim. Czech law operates on a much shorter timeline.

Under the Czech Civil Code, the general limitation period for property rights is three years from the date the right could first be exercised. This means that if a Czech partner breaches a contract, you generally have three years from the date of breach to file a lawsuit.

If you miss this deadline, your claim is prescribed—if the debtor raises the objection of limitation, the court will dismiss your case regardless of the merits. This creates particular problems when disputes enter negotiation. While the Czech Civil Code states that the limitation period does not run while parties are in serious out-of-court negotiations, relying on this provision is practically dangerous.

Proving exactly when negotiations started, ended, or whether they were "serious" enough to suspend the statute is difficult in court. If a court finds negotiations were not continuous, the time bar applies. Therefore, North Macedonian companies should treat the three-year limitation period as an absolute deadline.

Unlike some jurisdictions that permit interruption of the limitation period through simple demand letters, Czech law is strict: generally, you must file a lawsuit or enter a specific written agreement extending the limitation period.

1. If my Czech partner and I are negotiating a settlement, does this pause the limitation period?
Technically yes, but proving it is difficult and risky. The safer legal strategy is to assume the clock is ticking. You should file a lawsuit or obtain a written waiver/extension of the limitation period from the debtor before the deadline expires.

2. What if my Czech partner promised in writing to pay after the three-year period expires?
A written acknowledgement of debt can extend the limitation period to ten years from the acknowledgement. However, this requires specific wording. Without a formal acknowledgement, the old claim remains prescribed.

3. Do I need to file a lawsuit before the deadline, or is sending a formal demand letter sufficient?
You must file a formal lawsuit before a Czech court before the deadline expires. A demand letter alone does not stop the limitation period from running.

Dispute resolution and jurisdiction: A strategic choice you cannot ignore

When disputes arise with Czech partners, North Macedonian companies must make a critical decision: pursue the matter in Czech courts or seek arbitration. This choice determines which procedural rules apply, how long resolution will take, and whether judgment enforcement will be straightforward or complex.

North Macedonia is not an European Union member state. North Macedonian judgments cannot be automatically enforced in the Czech Republic under simplified EU procedures.

Instead, North Macedonian companies seeking to enforce Macedonian court judgments in the Czech Republic must navigate the Czech Act on Private International Law. This process is more complex than EU procedures. By contrast, arbitration awards are recognized and enforced in the Czech Republic under the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.

This creates a practical incentive for North Macedonian companies to pursue arbitration rather than litigation. Arbitration provides a neutral forum, maintains confidentiality, and ensures that awards are enforceable across borders through established international mechanisms.

However, arbitration requires careful advance planning. Arbitration agreements must be concluded in writing. Czech courts will not compel arbitration based on verbal agreements. Your commercial contracts with Czech partners should therefore include well-drafted arbitration clauses specifying the arbitration seat and rules.

ARROWS Law Firm has extensive experience representing international clients—including North Macedonian companies—in both Czech court litigation and international arbitration. Their lawyers understand the advantages and disadvantages of each dispute resolution mechanism and can advise whether Czech litigation or arbitration is optimal for your specific relationship. Whether you need representation in an existing dispute or advance contract drafting to ensure efficient dispute resolution, contact office@arws.cz.

Registering contracts with Czech state entities: The three-month validity deadline

If your North Macedonian company contracts with a Czech public entity, government agency, state-owned company, or even certain municipal companies, an additional requirement applies. Your contract must be published in the Czech Register of Contracts ( Registr smluv ) if its value exceeds 50,000 CZK.

This is not an optional administrative formality—it is a mandatory legal requirement. Under Czech law, if a contract subject to this act is not published in the Register of Contracts within three months of its conclusion, the contract is deemed cancelled from the beginning.

This requirement has no equivalent in North Macedonian law and consistently surprises foreign companies. Your company might perform all contractual obligations perfectly, receive payment, and believe the relationship is concluded. If the Czech state entity fails to publish the contract in the Register, your contract is retroactively invalid.

You may be technically required to return payments received (as unjust enrichment), and the relationship falls into legal chaos. The three-month deadline is absolute. There is no judicial discretion to extend it. The deadline applies to the obligation to publish, but in practice, both parties should monitor it.

Although the Act places the primary burden on the public entity, the private party is also entitled to ensure publication to save the contract.

1. Who is responsible for publishing the contract in the Register of Contracts?
Typically, the Czech public entity. However, legally, either party can perform the publication. It is highly recommended that you verify publication yourself or publish it on behalf of the partner if they fail to do so.

2. What happens if the Czech state entity refuses to publish our contract?
This is a serious problem. If you discover non-compliance approaching the three-month deadline, you should publish the contract yourself (requires a Czech data box or specific procedure) or contact legal counsel. ARROWS Law Firm can advise on remedies.

3. Can we extend the three-month deadline if we request it in writing?
No. The deadline is statutory and absolute. There is no mechanism to extend it. Once three months pass without publication, the contract is void.

Registration requirements and licensing: When regulatory approval precedes contract performance

North Macedonian companies must understand that in the Czech Republic, many business activities require official trade licenses ( živnostenské oprávnění ) or other regulatory approvals that must be obtained before contract performance begins. Assuming that home-country registration alone is sufficient to conduct regular business in the Czech Republic is a frequent mistake.

Unlike some jurisdictions where certain business activities can commence immediately, Czech law imposes licensing requirements for most commercial activities under the Trade Licensing Act. These requirements vary by industry; technology, construction, and recruitment services all have specific regulatory prerequisites.

If your North Macedonian company enters Czech markets without obtaining necessary trade licenses or industry-specific approvals, you may find yourself unable to legally perform contracts you have signed. This creates breach of contract liability even though non-performance results from regulatory non-compliance rather than commercial inability.

ARROWS Law Firm advises international clients on Czech licensing requirements specific to their industry. Rather than proceeding with contract negotiations without confirming regulatory clearance, our lawyers identify licensing requirements and advise on timelines and procedures. Contact office@arws.cz for licensing advice specific to your industry and planned Czech business activities.

Risks and Sanctions

How ARROWS helps (office@arws.cz)

Unenforced contractual penalty exposure: Czech penalty clauses ( smluvní pokuta ) are enforceable without proof of damage. A single late payment can trigger penalties equal to 5–10% of contract value.

Penalty clause negotiation and drafting: ARROWS Law Firm reviews penalty clauses before you sign, negotiates reasonable caps, and ensures penalties are legally sound.

Invalid agency or distribution agreements: Verbal agreements with Czech commercial agents are legally void due to lack of written form (§ 2483 Civil Code).

Commercial agency contract drafting and enforcement: ARROWS Law Firm drafts compliant written agency agreements satisfying all Czech Civil Code requirements.

Standard terms simply "knocked out": Your protective clauses (liability caps, warranty disclaimers) are eliminated by the Knock-Out Rule, replaced by less favorable statutory defaults.

Contract drafting excluding the Knock-Out Rule: ARROWS Law Firm drafts main contracts that expressly exclude the Knock-Out Rule and incorporate your protective terms.

Expired right to sue due to statute of limitations: Informal dispute negotiations can consume time while the 3-year limitation period expires. Proving suspension of the period is legally difficult.

Timely litigation and claim management: ARROWS Law Firm monitors limitation periods and ensures claims are filed or validly extended before deadlines expire.

Contract void due to missing state entity registration: If a contract over 50k CZK with a state entity isn't published in the Register within 3 months, it is retroactively void.

State entity contract management and compliance: ARROWS Law Firm advises on compliance with public entity registration requirements and monitors publication.

Understanding commercial agency in Czech markets: Differences from Macedonian agency law

North Macedonian companies establishing distributors, representatives, or commercial agents in Czech markets must understand that Czech commercial agency law differs significantly from Macedonian law in ways that create unanticipated obligations and compliance risks.

Commercial agency agreements in the Czech Republic are regulated by the Czech Civil Code, which implements EU Directive 86/653/EEC. While the directive harmonizes EU law, national implementation nuances matter.

Under Czech law, a commercial agent is defined as an independent entrepreneur who pursues long-term activities aimed at facilitating or negotiating business transactions for a principal. The question of whether a specific business relationship constitutes a "commercial agency" subject to statutory protections depends on the actual content of the relationship, not merely what parties label it.

This creates a significant risk: your North Macedonian company might believe it has hired an independent contractor, while Czech courts characterize the relationship as a commercial agency. If this occurs, your company becomes subject to mandatory statutory obligations regarding termination compensation, notice periods, and other agent protections that the parties did not intend.

Contact our experts

Czech commercial agency law imposes mandatory rights that parties cannot contract away. For example, when an agency relationship terminates, the agent is often entitled to a special indemnity if they acquired new customers or significantly developed the principal's business.

Non-compete clauses are enforceable but limited: the clause can restrict competition for a maximum of two years after termination. The clause can restrict competition for a maximum of two years after termination, can apply only to the territory/circle of persons and activity subject to the agency, and the agent must be compensated.

ARROWS Law Firm regularly drafts commercial agency agreements for international clients establishing distribution networks in the Czech Republic. Our lawyers ensure that agency relationships are properly structured to reflect your commercial intentions while complying with mandatory Czech statutory requirements. If you are establishing distribution channels in Czech markets, write to office@arws.cz.

1. If we hire an independent contractor without calling the relationship an "agency," are we exempt from Czech agency law?
No. If the actual relationship matches the statutory definition of commercial agency (independent, long-term negotiation of deals), mandatory agency protections apply regardless of the contract's title.

2. What rights does a terminated Czech commercial agent automatically receive?
A terminated agent is entitled to special indemnity ( odbytné ) if the agent acquired new customers or significantly developed business that continues to benefit the principal. This is a mandatory right.

3. Can we prohibit our Czech agent from working for competitors indefinitely?
No. Non-compete restrictions are limited to maximum two years after termination and must be reasonable regarding territory and scope.

Managing intellectual property in commercial relationships: Czech ownership rules

North Macedonian companies often create intellectual property—software, designs, marketing materials—as part of their Czech commercial relationships. Understanding who "owns" this intellectual property under Czech law is critical.

Under the Czech Copyright Act, there is a strict distinction between employee works and contractor works. For employees, the employer generally exercises economic rights to works created during employment. However, for contractors or external service providers, the author retains the copyright unless the contract includes an exclusive license or specific transfer of the right.

Czech law does not permit the full transfer of "authorship" (moral rights are inalienable). Instead, you must explicitly acquire the right to exercise economic rights or an exclusive license through a written agreement. A simple "work for hire" clause typical in other jurisdictions may be insufficient if it doesn't meet Czech statutory definitions.

For patents and industrial designs, the right to the patent generally belongs to the inventor unless transferred. If you hire a Czech contractor to invent, you must have a written contract ensuring the transfer of the right to the patent to your company.

Additionally, inventors often have statutory rights to additional compensation if the commercial success of the solution becomes disproportionate to what they were originally paid.

ARROWS Law Firm assists international companies in drafting intellectual property clauses and license agreements compliant with Czech law. If you are uncertain whether you have effectively secured rights to IP created by Czech partners, contact office@arws.cz.

Document authentication and translation: The apostille and superlegalization process

North Macedonian companies submitting documents to Czech authorities or Czech courts must understand authentication requirements.

North Macedonia is a party to the Hague Apostille Convention. This means that Macedonian public documents generally require an Apostille to be accepted by Czech authorities, rather than full consular superlegalization.

An Apostille is an official certification issued by designated Macedonian authorities verifying the authenticity of the signature on the document. Once apostilled, the document must typically be translated into the Czech language by a Czech court-appointed sworn translator ( soudní tlumočník ).

Timelines for obtaining apostilles and sworn translations can be lengthy. Delays can stall company incorporation or litigation filings.

ARROWS Law Firm helps international clients manage document authentication for Czech legal proceedings. We can coordinate with translators and guide you on the exact requirements for your specific documents. Write to office@arws.cz.

Risks and Sanctions

How ARROWS helps (office@arws.cz)

Intellectual property ownership disputes: You believe you own software created by a Czech contractor, but no written license/transfer agreement exists. The contractor may block your use of the code.

IP assignment/license agreements: ARROWS Law Firm drafts written agreements ensuring you secure the exercise of economic rights to works developed by Czech contractors.

Document authentication delays: Missing Apostilles or sworn translations delay entry into the Czech Trade Register or court filings.

Document authentication guidance: ARROWS Law Firm advises on the exact form of documents required to ensure smooth administrative processes.

Commercial agency mischaracterization: Your "contractor" claims agency indemnity upon termination because the contract was poorly defined.

Relationship structuring: ARROWS Law Firm advises on how to structure distributor vs. agent vs. contractor relationships to control statutory liabilities.

Regulatory non-compliance: You sign contracts but cannot perform because you lack specific Czech trade licenses.

Regulatory compliance: ARROWS Law Firm identifies necessary licenses for your industry and assists with the notification process.

Late payment interest: Czech statutory default interest is currently set at the CNB repo rate + 8 percentage points. This can accumulate rapidly.

Payment terms negotiation: ARROWS Law Firm advises on late payment interest exposure and negotiates contractual interest rates where possible.

Conclusion of the article

Commercial contracts with Czech partners require legal expertise specific to Czech law. North Macedonian companies that assume Czech contract law mirrors Macedonian principles expose themselves to expensive risks. The most dangerous risks—contractual penalties, the Knock-Out Rule, and formal validity requirements—arise from fundamental differences between legal systems.

These risks are preventable through proactive legal planning. ARROWS Law Firm, a leading Czech law firm based in Prague, regularly advises international companies on Czech commercial contracts. We combine deep knowledge of Czech law with an international perspective.

Contact office@arws.cz to discuss your Czech commercial relationship and how ARROWS Law Firm can protect your interests.

1. Our North Macedonian company has been working with a Czech distributor based on a verbal understanding for two years. Is our relationship legally binding?
It depends on the nature of the relationship. If it qualifies as a commercial agency ( obchodní zastoupení ), it is likely void due to lack of written form. If it is a simple framework purchase contract, it might be valid, but proving terms is difficult. You should formalize the relationship immediately. Write to office@arws.cz.

2. My company signed a contract with a Czech supplier that includes a 1% daily penalty for late payment. Is this enforceable?
Likely yes, unless a court deems it "manifestly disproportionate." 1% daily is very high and might be moderated by a court, but you face the risk of enforcement until a court decides. ARROWS Law Firm can assess your specific situation.

3. Our contract with a Czech state agency was never published in the Register of Contracts. It has been 4 months. What now?
The contract is legally cancelled from the beginning ( od počátku ). You are operating without a valid contract, and performance exchanged might be considered unjust enrichment. You must address this immediately, likely by concluding a new contract and dealing with past performance. Contact office@arws.cz.

4. Our standard terms limit liability, but the Czech partner's terms are unlimited. Who wins?
Likely neither. Under the Knock-Out Rule, conflicting terms cancel each other out, and statutory (unlimited) liability usually applies. You need a unified contract to prevent this.

5. We have been negotiating a settlement for 3.5 years. Can we still sue?
If the claim is older than 3 years, it is likely prescribed (time-barred). While negotiations technically suspend the limitation period under Czech law, proving the continuity of negotiations to save the claim is very difficult. If the other party raises the objection of limitation, you will likely lose.

6. Who owns the software we paid a Czech contractor to write?
Unless you have a specific written agreement transferring the exercise of economic rights or granting an exclusive license, the contractor likely still holds the copyright. "Work for hire" does not work automatically for independent contractors in CZ.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (office@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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