Contracts, Debt Claims and Enforcement

It is worth having a contract reviewed when the transaction is financially, commercially or personally important to you. This is especially necessary when the contract concerns a large sum, long-term cooperation, securities, limitations of liability, trade secrets, intellectual property or a situation where the other party has drawn up the contract itself.

Often the problem is not that something in the contract is obviously wrong. The problem may be that important questions are not regulated. For example, it is not clear when the work is deemed to be handed over, what to do in the case of defects, whether payment may be refused or how to terminate the contract. A few precise additions before signing can later prevent a long and costly dispute.

A good contract should clearly set out who the parties are, what exactly is done or handed over, when the obligation is performed, how much and when payment is made and how it is assessed whether the obligation has been duly performed. It should also be agreed what happens when the work, goods or service does not conform to the agreement or payment is delayed. Liability, default interest, a contractual penalty, compensation for damage, securities, confidentiality, amendment of the contract, termination of the contract and the resolution of disputes are also important. A good contract does not have to be excessively long. It must answer the questions that are truly important for the specific agreement.

A model contract can be suitable as a starting point, but it should not be regarded as a finished solution. A model does not take into account the aim of your transaction, the particularities of the field, the actual balance between the parties, payment risks or what may go wrong in the specific relationship.

For example, a general service contract may leave the handover of work and the remedying of defects unregulated. A loan agreement may lack a clear repayment procedure or security. In a cooperation agreement it may remain open who owns the content created, the client relationship or other value.

Many contracts can be valid orally as well, but important agreements should always be recorded in writing. Written form helps to prove later what the parties agreed on, what the price, the deadline, the scope of work and the liability were. At the very least, orally agreed terms are confirmed by email or other exchange of messages, which considerably simplifies the later identification of the contract terms.

For certain contracts, however, the law requires a specific form. For example, transactions related to real property often require notarial form. Form requirements may also be important for securities, holdings, lease relationships or other transactions. If the law requires a specific form and it is not followed, the agreement may turn out to be void or it cannot be enforced in the desired way.

For an entrepreneur, a contract is a risk-management tool. It is worth checking above all the object of the contract, the pricing, the payment deadlines, the handover, the acceptance, the remedying of defects, liability and the procedure for terminating the contract. It is also necessary to think through what to do when the client does not pay, the supplier is late or the cooperation partner does not perform its obligations.

In many business contracts, limitations of liability, contractual penalties, confidentiality, non-compete restrictions, the ownership of intellectual property, the use of data and standard terms are also important. If a company uses sales terms or e-shop terms, it must be ensured that they are binding on the client, understandable and in accordance with the law.

Not always. Standard terms are terms that one party has prepared for repeated use and that the other party usually does not negotiate separately. They are common in e-shops, terms of use, sales terms and the general terms of service providers.

In order to be able to rely on standard terms, they must be reasonably accessible and understandable to the other party. In consumer contracts, unreasonably harmful or surprising terms may be void. For this reason it is worth drawing up the general terms so that they protect the entrepreneur but do not create terms that cannot be used in the event of a dispute.

Yes, many agreements can be binding orally, by email or in messages. The question is not always whether the agreement is valid but whether its content can later be proven. When the parties understand the price, the deadline or the scope of work differently, proving it can become difficult.

For this reason it is worth confirming important agreements at least in a format which can be reproduced in writing. An email, an order confirmation, an offer, a confirmation of acceptance or a digitally signed agreement can later be a very important piece of evidence.

Yes, a contract can generally be amended by agreement of the parties. The amendment should be made in a form in which its content can later be proven. If the original contract states that amendments must be in writing or digitally signed, this rule must generally be followed.

In practice, many disputes arise in a situation where the parties agree by telephone on a new deadline, additional work, a change in price or a payment schedule but leave it unconfirmed in writing. Even a small amendment is worth confirming by email, because later it may be precisely this that determines what rights the parties have.

Terminating a contract depends on the type of contract, the terms of the contract and the nature of the breach. Withdrawal from a contract and cancellation of a contract are not the same thing. Withdrawal comes into consideration above all in the case of a fundamental breach. Cancellation is more common in long-term contracts, for example in a long-term service, cooperation, commercial lease or lease relationship.

Often, before termination, the other party must be given an additional time limit to perform the obligation or to remedy the breach. Before sending a notice of termination it is worth checking whether the contract contains an advance notice period, a form requirement, a contractual penalty or another consequence. Incorrect termination can lead to a situation where the terminating party itself is liable for breach of the contract.

First, the breach should be recorded and the evidence preserved. The contract, correspondence, invoices, photos, handover and acceptance acts, messages and other documents can be helpful. Then it is necessary to assess what you wish to achieve, whether performance of the obligation, the remedying of defects, a reduction of the price, termination of the contract, default interest, a contractual penalty or compensation for damage.

It is often sensible to send the other party a written notice or claim that describes the breach, refers to the contract and, where necessary, gives an additional time limit. A well-considered letter can help to reach an agreement but is also important if the dispute later reaches court.

Claims arising from a contract have limitation periods. The limitation period for a claim arising from a transaction is generally three years, but there are exceptions to this. Limitation does not mean that the debt disappears automatically. It means that the debtor may, relying on limitation, refuse to satisfy the claim.

If a debt remains unpaid, it is worth starting with a clear written claim. If no agreement is reached, depending on the claim, the expedited procedure in the matter of a payment order or an action may be suitable. If the claim is confirmed by a court decision, a payment order, a notarial agreement or another enforcement instrument, it is possible to turn to a bailiff. If the claim is unfounded, too large, expired by limitation or the debtor’s rights have been breached in the enforcement proceedings, it can be contested.