COMMERCIAL OBLIGATIONS

Generally
• Commercial obligations:
• relations based on contracts entered into between
entrepreneurs in connection with their business activities

• relations based on typical commercial contracts listed in the

Commercial Code regardless of whether the parties to the
contract are entrepreneurs

• relations based on contracts the parties to which agreed upon

applicability of the Commercial Code

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 COMMERCIAL OBLIGATIONS

• Commercial obligations are governed

• by the Commercial Code and,
• in the absence of specific regulations in the Commercial
Code, by the Civil Code

• If a party to a commercial contract is a “consumer”

• specific protection of consumers granted in the Civil Code
and public laws regulating consumer protection is
applicable in addition to the Commercial Code

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Commercial Contracts

• Definition
• Contract, in general, is a bilateral or multilateral legal act
aimed at creation of a relationship between (among) the
parties consisting of mutual rights and obligations
• Process of entering into contracts
• Subject mainly to the Civil Code. Typical contracting
process consists of two steps (unilateral legal acts):
• the offering party submits an offer, and
• the other party accepts the offer

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• At the moment when the offer and acceptance meet the

contract is concluded (executed)
• This applies only if the offer is accepted without any
reservations or modifications
• In case the acceptance contains proposals for a change of
originally offered conditions the contract is not created and
the acceptance constitutes a new offer

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• Both offer and acceptance must meet general requirements

for valid legal acts
• Offer:
• must determine the subject matter of the contract and define
the main parts of the contract
• must be delivered to the other party
• the offering party is bound by the offer for a certain period
of time, i.e. the offer cannot be revoked
• if the offering party declared that the offer is irrevocable
• for a time period the offering party determined for acceptance
of the offer

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• Acceptance:
• must clearly state that the offer is accepted without
reservations
• must be delivered to the offering party
• must be delivered to the offering party within the deadline
stipulated for the acceptance
• the delayed acceptance has a legal effect only if the offering
party agrees with the delay and informs the accepting party
thereof
• Both offer and acceptance must be in writing only if
required for the respective type of contract by law or
agreed
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• The above process applies to all contracts in private law

relations; it is not specific only to commercial contracts
• The specifics of contracting process under the Commercial
Code:
• the parties may determine certain parts of the contract by
• reference to general terms and conditions drawn up by
professional or special-interest institutions, or
• reference to terms and conditions drawn up by one of the
parties known to both parties, i.e. they must be appended to the
offer

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• Under certain conditions the accepting party may accept the

offer by performance of the offer without prior formal
advising the offering party about the acceptance

• Protection of information exchanged by the parties during

the contracting process is ensured
• no confidential information may be disclosed to a third party or
used contrary to the purpose of contract negotiation regardless
of whether the contract is concluded or not

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Special forms of contracting

• Agreement on future agreement

• Definition - agreement to enter into a future contract with an
object of performance determined at least in a general
manner

• Purpose - make sure that the contemplated transaction will

take place on “pre-agreed conditions”

• Preparatory agreement of binding nature

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• Mandatory content of agreement on future agreement:

• obligation of one or both parties to enter into future contract
• time limit for entering into future contract
• subject matter of the future contract determined at least in
general terms
• If the obligated party refuses to enter into future contract the
authorized party may request the court:
• to execute the contract by its decision, or
• to award the authorized party damages sustained as a result of
a breach of the obligation to enter into contract by the other
party

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General legal requirements for validity of commercial

contracts

• Form of contract
• Principle of “informality” of commercial contracts -
contracts must be made in writing only if it is specifically
required for the pertinent type of contract

• Changes to the contract entered into in writing should be

made in writing only if explicitly required by the contract

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• Content of contract
• Commercial contract must fulfill general requirements of
the Civil Code
• The contract must be made in free will and in earnest, it
must be expressed in understandable and definite way
• The content and subject matter of the contract must not
contradict or circumvent the law and good morals
• The performance required by the contract must not be
impossible
• Contracts made in contradiction with these requirements are
as a rule null and void
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Changes to commercial contracts

• Changes may relate to the parties themselves or to the

content of contract
• Change of parties - assignment of rights
• Creditor may assign its claims (receivables) from contract by
written agreement to another party
• Consent of debtor is not required
• As from the moment the debtor learns about assignment it is
obligated to perform the contract vis-a-vis the assignee

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• Change of parties - assignment of obligations

• Third party may agree in writing with debtor on taking over
the debt from debtor
• Third party steps into shoes of debtor provided the creditor
consents to this change
• Changes in content of contract
• Parties may agree on any change of their mutual rights and
obligations

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Termination of commercial obligations

• Fulfillment (discharge of obligation)

• Debtor is discharged from its obligation arising from the
contract if it fully and timely satisfies the creditor
• Creditor is obligated to accept partial performance unless the
agreement between the parties stipulates otherwise

• In addition, the contractual obligation may cease to exist

for reasons other than performance in cases set forth by
law (Commercial Code or by Civil Code)

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• Termination by agreement
• The parties may agree:
• on termination of rights and obligations arising from a
contract
• on cancellation of the existing relationship and substituting
such relationship by a new one in full or in part
• on waiver of a claim; agreement must be in writing
• Agreement under which a person waives rights that may
arise in the future is null and void

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• Impossibility of performing obligation

• Impossibility causing the termination of the agreement:
• the obligation cannot be performed for objective reasons
(nobody is able to perform the obligation - objective
impossibility)
• the debtor is not able to perform due to obstacle on his part
(subjective impossibility), or
• the performance became prohibited by legal rules or requires a
special license and license was not granted to the debtor,
although he exercised best effort to obtain it

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• The performance is not impossible if the obligation can be

performed under more difficult conditions, e.g. for higher
cost or within longer period of time.

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• Withdrawal
• Either party may withdraw from contract under conditions
agreed in the contract or set forth by law
• The Commercial Code permits withdrawal from contract in
case of a breach of contract:
• if the breach of contract constitutes a fundamental breach the
aggrieved party may withdraw from contract with immediate
effect
• it must only notify the breaching party of the withdrawal
without undue delay once it has learned of the breach

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• Breach is considered fundamental if the breaching party

knew that the other party would not be interested in
performance of the obligation in the event of such a breach
• In case of doubt, it is presumed that a breach of contract is
not fundamental
• In case of non-fundamental breach,
• affected party may withdraw from the contract if the breach is
not cured by the breaching party in additional time granted by
the affected party

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• Set off
• In case creditor and debtor have mutual claims (receivables)
of the same type either party may set off its claim against the
claim of the other party

• Mutual claims cease to exist, with respect to the amount they

match at the moment when both become due and payable

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Prescription, statute of limitation

• Existence of rights and obligations arising from
commercial contracts depends not only on acts of the
parties to the contracts but also on passing of time
• Right becomes statute-barred upon expiry of the limitation
period (negative prescription) set forth by law (statute of
limitation)
• Right which is “statute-barred” becomes unenforceable
with a court, it does not cease to exist
• The obligated party may fulfill its obligation voluntarily

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• Limitation period begins to run on the day when it was

possible to assert the right before a court – as a rule
• The general limitation period is four years, in certain cases
is shorter
• Parties are not allowed to shorten the limitation period
and change its commencement
• Parties can extend by agreement the limitation period up
to four years
• Obligated party may extend the limitation period by
unilateral act up to ten years

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Security obligations

• Special legal remedies providing means for fulfillment of

contractual obligations
• Purpose and concept – security obligations strengthen legal
position of creditor
• by creating additional (accessory) legal relationship
• in which creditor acquires specific remedies against debtor
• Several categories of security obligations
• personal
• in rem

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• Suretyship
• Definition – whoever declares to creditor to satisfy him if
debtor fails to perform, becomes surety for debtor
• Suretyship is personal security – surety undertakes to
perform in lieu of debtor
• Suretyship improves position of creditor – another
person’s property is available to creditor

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• Suretyship established – surety declaration addressed to

creditor
• Form of surety – must be made in writing
• Content – declaration of surety, specification of secured
obligation, specification of debtor
• Rights and obligations of surety
• Creditor may request performance of debt from surety
provided debtor failed to perform although requested by
creditor

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• Surety must satisfy the creditor in full unless suretyship is

limited to certain amount or in time
• Surety has the same defense against creditor as the original
debtor
• Surety who performed instead of debtor has a subrogation
right against debtor
• Suretyship ceases to exist if
• original debt becomes extinct (by discharge or otherwise)
• surety satisfies the creditor instead of debtor

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• Security interest
• Definition – secures a receivable (claim) by providing
creditor with a possibility to satisfy his claim from the
proceeds of realization of collateral
• Nature – right in rem:
• attached to a thing that serves as collateral
• security interest remains attached to a collateral even if
collateral changes hands

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• Security interest established:

• security contract (in writing)
• another legal act depending of the type of collateral
(registration, handing over)
• Satisfaction of creditor through security interest:
• secured creditor may only suggest that
• collateral is sold in public auction or by court and
• proceeds transferred to creditor for satisfaction of his claim
• secured creditor may not keep collateral or sell it by himself
directly

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