Czech Republic: Force Majeure and loss of the basis for business in the Czech Republic

When does the obligation to perform the contract cease to apply?

In extreme cases, the Czech Civil Code offers the institute of "subsequent impossibility of performance", which can be invoked in case of objectively impossible performance of the obligation. However, the BGB also stipulates that performance is not impossible if the claim can be fulfilled under more difficult conditions, at higher costs, with the help of another person or only after a certain period of time. The performance must become objectively absolutely impossible; therefore, the subjective impossibility of the performance alone is not sufficient. In case of a dispute, a court may be called in at any time to rule on the impossibility of performance.

When may a withdrawal or an adjustment of the contractual relationship be considered?

According to the rules of the Czech Civil Code, in the event of a material change of circumstances, each party has the right to demand that the other party resume negotiations on the contract already concluded. However, the prerequisite for such a step is that such a change represents a particularly gross disproportion in the rights and obligations of the parties by disadvantaging one of them either through a disproportionate increase in the cost of performance or through a disproportionate reduction in the value of performance. Such a change must also not be reasonably expected or influenced and only occur or become known after conclusion of the contract.

How can future contractual relationships be optimally structured?

As a rule, it is recommended that the circumstances of force majeure be expressly regulated in the contract. The best way to avoid a possible impossibility of performance is therefore to carefully negotiate the terms of the contract. The pandemic and the war have shown that in contractual negotiations, one must also reckon with perceived impossible situations. Carefully building the business relationship and communication between the parties is thus the key to success.

Autor: Monika Wetzlerová-Deisler