Commercial Contracts with Czech Partners: Common Mistakes Made by Polish Companies

22.9.2025

As a Polish company expanding into the Czech Republic, you are entering a familiar yet distinct business landscape. To succeed, you need reliable partners and legally sound agreements. This article provides clear answers on how to navigate the key differences between Polish and Czech commercial law, helping you avoid costly contractual mistakes. As an English-speaking law firm based in Prague, European Union, we specialize in guiding foreign clients like you through these complexities.

Do you 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.

The Hidden Risks in Czech-Polish Business Deals: Why Familiarity Breeds Complacency

The strong economic and cultural ties between Poland and the Czech Republic make cross-border business seem straightforward. However, this familiarity can be a trap. Many Polish companies assume that business practices and legal principles are nearly identical, leading to a dangerous sense of complacency. This oversight can expose your company to significant financial and legal risks.

The root of these differences lies in the divergent legal paths the two nations took after 1989. While Poland's modern contract law evolved from its 1964 Civil Code, the former Czechoslovakia had a "clean slate" upon which to build a new, market-oriented legal framework. This historical divergence means that legal concepts that appear similar on the surface often function very differently in practice. Even translating legal documents is a highly specialized field, as the underlying legal concepts are not directly interchangeable.

This legal reality is compounded by a cultural nuance: the Czech business mentality is often described as down-to-earth and pragmatic, mistrusting vague or overly idealistic language. This translates into a legal culture that values extreme precision in contracts. Any ambiguity can be exploited, and assumptions based on Polish legal norms will not protect you in a Czech court.

Mistake #1: Misunderstanding the Power of Contractual Penalties (Smluvní Pokuta)

One of the most significant and financially dangerous traps for Polish companies is the misunderstanding of contractual penalties. In Poland, the kara umowna is strictly limited to securing non-monetary obligations. Attempting to apply it to a monetary breach, such as late payment, is inadmissible and has been confirmed as such by the Polish Supreme Court. For late payments, Polish law defaults to statutory interest on arrears (odsetki za opóźnienie).

Czech law is fundamentally different. The Czech contractual penalty, or smluvní pokuta, is a powerful and flexible tool that can be used to secure any contractual obligation, including monetary ones. A Czech company can legally include a clause imposing a substantial penalty for a simple delay in payment. This penalty is enforceable even if the creditor suffered no actual financial damage from the breach.

This creates a critical asymmetry in contract negotiations. A Polish company, accustomed to its domestic legal framework, might overlook a smluvní pokuta clause related to payment terms, assuming it is either unenforceable or a minor issue. In reality, they could be agreeing to a penalty that far exceeds any statutory interest, potentially amounting to a significant percentage of the entire contract value. The primary purpose of the Czech smluvní pokuta is preventive and punitive, designed to strongly motivate compliance.

While these penalties are powerful, they are not absolute. Czech courts have the authority to moderate a penalty that is deemed "unreasonably high" when considering the value and importance of the secured obligation. However, this requires initiating a legal challenge and does not change the fundamental validity of applying penalties to monetary breaches. A Polish company that signs a standard Czech-drafted contract without legal review is likely accepting a far stricter and more financially punitive regime than it anticipates.

Risks of Improperly Drafted Penalty Clauses

Risks and Penalties

How ARROWS Helps

Unexpectedly large financial penalties for minor breaches like late payment, which are not penalised this way under Polish law.

Contract review and drafting to ensure penalty clauses are fair and compliant with Czech law. Need a contract reviewed? Write to office@arws.cz.

Invalidity of the entire contract if penalty clauses are drafted based on Polish assumptions, leading to legal uncertainty.

Legal opinions on the enforceability of your existing contract clauses under Czech law. 

Disputes over "unreasonably high" penalties, leading to costly litigation even if you are in breach.

Representation in court or before authorities to negotiate or challenge excessive penalties. For immediate assistance, write to us at office@arws.cz.

Loss of negotiation leverage by unknowingly accepting a one-sided penalty regime.

Legal consultations to develop a negotiation strategy that protects your interests in the Czech market. Get tailored legal solutions by writing to office@arws.cz.

Mistake #2: Neglecting Formal Requirements and Contract Validity

While many business deals begin with informal agreements, failing to adhere to specific legal formalities can render a contract void. This is another area where Polish and Czech laws diverge significantly, creating a "validity trap" for the unwary. A prime example is the Commercial Agency Agreement.

Under Section 2483 of the Czech Civil Code, an Agency Agreement must be executed in writing (písemná forma) to be legally valid and enforceable. A verbal agreement with a commercial agent in the Czech Republic is void from the start. This means a Polish principal relying on such an agreement would have no legal recourse to enforce exclusivity, protect confidential information, or claim damages if the agent fails to perform.

In contrast, the Polish Civil Code does not require a specific form for an Agency Agreement, meaning it can be concluded orally or even implicitly through performance. While written form is required in Poland for specific clauses to be valid—such as a del credere clause (agent's guarantee of customer payment) or a post-termination non-compete clause—the underlying agency relationship itself can be established verbally.

A Polish company operating under its domestic assumptions might establish a relationship with a Czech agent based on a verbal understanding, believing a valid contract is in place. In the eyes of Czech law, no contract exists. This could lead to a catastrophic business outcome, where the agent can walk away from their obligations without consequence, potentially taking clients and trade secrets with them. This risk extends beyond agency; while many Czech contracts can be verbal, specific types, including some real estate and consumer credit agreements, have mandatory written requirements.

FAQ – Legal tips about Contract Validity

  • Is a verbal agreement with my Czech partner always invalid?
    Not always. The Czech Civil Code allows for verbal agreements in many cases. However, for certain crucial contracts, like Agency Agreements, written form (písemná forma) is mandatory for validity. Assuming a verbal deal is secure is a significant risk. For certainty, contact our lawyers at office@arws.cz.
  • My Polish agency contracts are often verbal. Is that a problem in the Czech Republic?
    Yes, a major one. Unlike in Poland, a verbal Agency Agreement is legally void under Czech law. You would have no legal basis to enforce your rights against the agent. Need help drafting a compliant Czech agency contract? Email us at office@arws.cz.
  • Can we agree on contract terms via email?
    Email exchanges can form a binding contract if they demonstrate clear agreement on essential terms. However, for contracts requiring a formal written form, a simple email may not suffice without a proper electronic signature. To ensure your electronic communications are legally binding, get tailored legal solutions by writing to office@arws.cz.

Mistake #3: Overlooking Key Differences in Termination and Liability

Understanding how and when a contract can be terminated, and for how long a party remains liable, is crucial for managing business risk. While some aspects of Czech and Polish law are harmonized under EU directives, critical differences remain, particularly concerning the statute of limitations.

For Agency Agreements concluded for an indefinite period, the statutory notice periods (výpovědní doba) are identical in both countries: one month during the first year, two months during the second, and three months for the third and subsequent years. This similarity, driven by EU law, can unfortunately reinforce the false assumption that other procedural rules are also aligned.

A critical procedural minefield is the statute of limitations—the deadline for bringing a legal claim. Missing this deadline results in the absolute and permanent loss of the right to sue. Polish law generally provides for a three-year limitation period for claims related to business activities and a general six-year period for other claims. Furthermore, since a 2018 reform, the Polish limitation period always ends on the last day of the calendar year, a unique procedural nuance.

Czech law operates differently. The general subjective limitation period for civil claims is three years from when the right could first be exercised, but this is subject to an overriding ten-year objective period from when the claim matured. For commercial relationships, a four-year period was often applicable under the former Commercial Code. A Polish company might assume it has three years to file a claim, only to discover that a different Czech period applies and has already expired. A miscalculation based on home-country rules can render a valid, high-value claim completely worthless overnight.

Termination and Liability Pitfalls

Risks and Penalties

How ARROWS Helps

Wrongful termination of a contract, leading to claims for damages from your Czech partner for breach of contract.

Drafting documentation with clear and compliant termination clauses that protect your right to exit a partnership fairly. Need legal help? Contact us at office@arws.cz.

Permanent loss of the right to claim damages due to miscalculating the Czech statute of limitations.

Legal analysis of your claims and deadlines to ensure your rights are preserved. Our lawyers are ready to assist you – email us at office@arws.cz.

Disputes over liability for defective goods, where Czech consumer protection laws might impose stricter standards than expected.

Preparation of internal company policies and terms and conditions that align with Czech commercial and consumer law. For immediate assistance, write to us at office@arws.cz.

Mistake #4: Choosing the Wrong Path for Dispute Resolution

The "boilerplate" clauses at the end of a contract—governing choice of law and dispute resolution—are often the most neglected during negotiations. Yet, they become the most important when a disagreement arises. An improperly drafted clause can force you into a costly, time-consuming, and potentially biased legal battle in an unfamiliar system.

For Polish companies, the key decision is whether to have disputes resolved by Czech state courts or through private international arbitration. There are distinct advantages and disadvantages to each.

Czech State Courts: As both Poland and the Czech Republic are EU member states, judgments issued in one country are generally recognized and enforceable in the other under EU regulations and bilateral treaties. This provides a degree of certainty. However, litigation in a foreign court means navigating an unfamiliar legal procedure, language barriers, and the risk of a public proceeding that could expose sensitive business information.

International Arbitration: Arbitration offers significant advantages, particularly for complex commercial disputes. Proceedings are private and confidential, protecting trade secrets and business strategies from public disclosure. Parties can select arbitrators with specific industry expertise, and the process is often faster and more flexible than state court litigation. 

Arbitral awards are highly enforceable internationally under the New York Convention, to which the Czech Republic is a signatory. The high-stakes Turów mine dispute, which saw Poland facing daily fines of €500,000 from the EU's highest court, serves as a powerful reminder of how severe the financial consequences of cross-border conflicts can be.

The choice is not merely a legal preference but a core business strategy. If your contract involves valuable intellectual property, the confidentiality of arbitration may be non-negotiable. For a straightforward debt collection case, the established procedures of the Czech courts might be more cost-effective. A one-size-fits-all approach is a recipe for future trouble. The dispute resolution clause must be tailored to the specific risks and nature of your business agreement.

Dangers in Dispute Resolution Clauses

Risks and Penalties

How ARROWS Helps

Litigating in an unfamiliar legal system and language, leading to high costs for translation, local counsel, and procedural uncertainty.

Contract drafting with a clear choice of law and jurisdiction clause that provides predictability and control. Do not hesitate to contact our firm – office@arws.cz.

Receiving a favorable judgment that is difficult or impossible to enforce in the other country, making the legal victory worthless.

Legal analysis of the best forum (Czech courts vs. arbitration) for your specific business case to ensure enforceability. Need legal representation? Write to office@arws.cz.

Public exposure of sensitive business information (e.g., pricing, trade secrets) in public court proceedings.

Drafting arbitration clauses that ensure disputes are handled confidentially, protecting your competitive advantage. Get tailored legal solutions by writing to office@arws.cz.

No dispute resolution clause at all, leading to costly preliminary battles just to determine where the dispute will be heard.

Contract review to identify and fix critical omissions, providing you with legal certainty from day one. For immediate assistance, write to us at office@arws.cz.

Mistake #5: Relying on Polish Templates and Assumptions

The final, and perhaps most common, mistake is simply transposing Polish business and legal templates onto the Czech environment. Using a standard Polish sales contract or assuming that company formation rules are identical is a high-risk strategy. The Czech legal system has its own specific requirements and pitfalls that must be addressed locally.

Common errors for foreign companies entering the Czech market include choosing the wrong legal form for their business (e.g., a limited liability company, s.r.o., versus a joint-stock company, a.s.), which can lead to unnecessary administrative burdens and liability risks. Another frequent pitfall is delaying mandatory tax and VAT registration, which can result in immediate penalties from strict Czech authorities.

Even the interpretation of general contractual principles can differ. For instance, while Polish law often refers to broad "principles of community life" in assessing contract performance, other civil law systems may place a stronger emphasis on the duty of "good faith" throughout the contractual relationship. These subtle differences can influence how a court interprets the obligations of each party in a dispute. Relying on a translated Polish contract is not enough; the agreement must be fundamentally adapted to the Czech legal context.

FAQ – Legal tips on Adapting Contracts

  • Can I use my standard Polish sales contract for Czech customers?
    It is highly risky. Clauses on liability, penalties, and dispute resolution may be unenforceable or have unintended consequences under Czech law. A localized contract is essential for protection. To have your contracts adapted, email us at office@arws.cz.
  • What is the most common non-contractual mistake Polish companies make?
    Delaying tax and VAT registration. The Czech tax authorities have strict deadlines and rules. Failure to comply can lead to immediate fines and operational disruptions. Our lawyers can guide you through the registration process – contact us at office@arws.cz.

How ARROWS Provides Certainty in Your Cross-Border Contracts

Navigating the complexities of a foreign legal system requires more than just legal knowledge; it demands a deep understanding of the local business culture and the specific challenges faced by international companies. ARROWS, a leading Czech law firm in Prague, EU, is uniquely positioned to protect the interests of our Polish clients. Our lawyers combine deep expertise in Czech law with a nuanced understanding of the Polish market, bridging the gap that often leads to costly contractual errors.

For over 10 years, our ARROWS International network has provided seamless legal support across 90 countries, giving us a global perspective on cross-border challenges. We bring this international experience to every client relationship, whether you are negotiating a simple supply agreement or structuring a complex multi-jurisdictional investment. Our proven track record includes supporting over 150 joint-stock companies and 250 limited liability companies, demonstrating our capacity to handle the needs of businesses of all sizes.

To prevent the mistakes outlined in this article, we provide a comprehensive suite of services, including expert contract drafting and review, the preparation of internal company policies, and robust representation in court or before public authorities. We deliver clear legal opinions to assess your risks and can provide professional training for your employees to ensure your team is prepared for the Czech business environment.

Your Next Step: A Secure Foundation for Your Czech Business Venture

Proactive legal preparation is not a cost; it is an essential investment in the security and long-term success of your business in the Czech Republic. A single preventable contractual mistake can erase profits and damage valuable business relationships. Before you sign your next agreement, ensure it is reviewed by experts who understand the critical nuances of both Polish and Czech law.

Don't let hidden legal risks undermine your expansion. Contact our international law firm operating from Prague, European Union, for a professional consultation to build a secure legal foundation for your venture. Protect your business today. Write to our team at office@arws.cz.

FAQ – Most common legal questions about Czech-Polish Commercial Contracts

1. Is a verbal agreement with my Czech partner legally binding?
It can be, but many important contract types, like agency agreements, require written form to be valid in the Czech Republic. Relying on verbal deals is a major risk. To clarify your situation, do not hesitate to contact our firm – office@arws.cz.

2. Can I enforce a judgment from a Polish court in the Czech Republic?
Yes, due to EU regulations and bilateral treaties, judgments from Polish courts are generally enforceable in the Czech Republic. However, the process has specific procedural requirements. 

3. What is the single most important clause for a Polish company to check in a Czech contract?
The contractual penalty (smluvní pokuta) clause. It can apply to late payments and other breaches in ways that are not permitted under Polish law, creating significant financial risk. For a thorough contract review, get tailored legal solutions by writing to office@arws.cz.

4. How long do I have to file a claim for a breach of contract in the Czech Republic?
The general subjective statute of limitations for civil claims is three years, but different periods can apply. This differs from the Polish system, so it is critical to get local advice to avoid your claim being time-barred. Need legal help? Contact us at office@arws.cz.

5. Should I choose Czech courts or arbitration for my contract?
It depends on your business needs. Arbitration offers confidentiality and speed, while courts follow established public procedures. The right choice is a strategic decision.

6. Do I need a Czech bank account and VAT registration to do business there?
Yes, these are critical early steps. Delaying tax registration is a common and costly mistake for foreign companies. A local bank account is essential for operations. For immediate assistance with company formation and registration, contact us at office@arws.cz.

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