When a discount on the purchase price is determined by an expert:

In business transactions – and especially in the sale of companies or shares – it is crucial to have a precisely worded contract. In particular, provisions on discounts on the purchase price in the event of defects or shortcomings can easily give rise to disputes if they are not clear. Many business owners or investors may consider including a clause in the contract stipulating that the amount of such a discount will be determined by an independent expert. At first glance, this seems practical – an expert determines the amount and prevents disputes. But is it really that simple? A recent decision by the Supreme Court (file no. 23 Cdo 713/2024 of May 6, 2025) shows how carefully such agreements need to be approached and how courts can differ in their interpretation of legal regulations and contractual agreements.

Author of the article: Mgr. Pavel Čech, ARROWS (office@arws.cz, +420 245 007 740),

Let's imagine a situation: You are selling a 100% stake in your company for tens of millions of crowns. Part of the purchase price is to be paid immediately and the second installment (in our case, approximately CZK 6 million) after a certain period of time. You have included a provision on liability for defects in the contract with the buyer – if it turns out that the share (company) you have sold has “defects” (e.g., it does not correspond to your statements about the company's condition or its financial management), the buyer is entitled to a discount on the purchase price. What's more, you have also agreed on a mechanism for determining the amount of the discount: if you cannot agree yourselves, the amount will be determined by an independent expert chosen by both parties.

At first glance, everything seems reasonable – both parties are clear in advance what will happen if a problem arises. The buyer protects themselves by not paying the full price for defective performance, and the seller knows that any discount has its limits (in this case, it was limited to the amount of the second installment) and will be determined by an expert, not by estimation. To be on the safe side, the parties expressly confirmed in the contract that the buyer may unilaterally set off the discount against the unpaid portion of the price.

The problem arose when the buyer actually claimed defects. After taking over the company, he discovered, for example, discrepancies in the accounting, a decline in profits, and other phenomena that, in his opinion, contradicted the sellers' assurances about the state of the company. He notified the defects in a letter and quantified the discount at a full CZK 6,000,000 (coincidentally, this was the maximum amount under the contract) – he unilaterally offset this amount against the remaining installment of the purchase price. In other words, he refused to pay the second installment, arguing that this entire amount covered the discount he had claimed. In addition, he demanded contractual penalties and damages for further breaches of contract.

The sellers (the original owners) naturally disagreed. They claimed that they had not concealed any material defects, that the buyer had claimed the defects too late, and, most importantly, that he had unlawfully deducted the entire 6 million. They therefore turned to the court and sued the buyer for payment of the second installment (or rather the part of it that the buyer had withheld).

Two courts, two opinions: the validity of the expert witness clause under fire

The dispute was brought before the Regional Court in Brno (court of first instance). The court sided with the sellers in its interpretation of the disputed provision of the contract. It confirmed that the clause stipulating that the amount of the discount would be determined by an appointed expert witness was valid. It proceeded from the assumption that rights arising from defective performance (including price discounts) are dispositive in contracts between entrepreneurs, i.e., they can be agreed upon at will. The law does not expressly prohibit agreeing that instead of a precise amount or formula, the assessment will be left to a third party—an expert. According to the regional court, such an agreement is not invalid in itself if it was concluded freely and seriously.

In practical terms, the first court said: The parties may agree that any discount will be calculated by an expert; this is not illegal. The expert essentially acts as a pre-determined expert arbitrator for the technical issue of calculating the discount.

However, the regional court also stated that the discount claimed by the buyer (CZK 6 million) was not sufficiently proven. Even the expert opinion submitted did not change this, as the opinion dealt with the amount of damage, but did not address whether there had actually been defective performance (whether the sellers' contractual representations had been breached and reported in a timely manner) – which were the disputed issues. The court of first instance classified the buyer's claim (entitlement to a discount) as disputed and uncertain, and therefore not eligible for set-off under Section 1987(2) of the Civil Code. In other words, until it is clear that the buyer is entitled to a discount and in what amount, it cannot simply deduct it unilaterally. The Regional Court therefore ordered the buyer to pay most of the amount withheld to the sellers.

The buyer (the defendant company) appealed to the High Court in Olomouc. The appellate court saw it differently – and, somewhat surprisingly, declared the agreement on the expert witness to be absolutely invalid. It argued that such an agreement allegedly contradicted legal principles. According to the court, the parties cannot contractually “take away” the court's power to decide on claims. The High Court argued that the determination of the amount of the discount by an expert witness preliminarily replaces the role of the court, which is inadmissible. It emphasized that no expert opinion can be binding without the possibility of judicial review. According to the appellate court, such an agreement therefore contradicted the law and the principle that only the court has the authority to decide on the existence and scope of a claim.

From the perspective of the High Court, the fact that the parties had agreed on the expert voluntarily did not change anything – it was still an interference with procedural rights. The result? The High Court declared the clause on the determination of the discount by an expert invalid and concluded that the buyer did not have a “solid” legal basis for his set-off. Nevertheless (paradoxically), the appellate court also ruled that the buyer had to pay the seller almost the entire amount (thus agreeing with the court of first instance that the claim for a discount had not been proven and was not applicable for set-off).

For entrepreneurs, this situation is a warning sign—even the courts were unclear whether such a contractual provision was valid. One court said “yes, it is valid,” while another said “no, it is absolutely invalid.” What now? The Supreme Court had to provide the answer.

Supreme Court: Respect for the agreement between the parties, but judicial review remains

Fortunately, the Supreme Court of the Czech Republic tackled the issue head-on and took a clear position that provides more certainty for entrepreneurs. First, it confirmed the general principles: the sale of a share is a purchase agreement, even if the subject matter is intangible (a share in a company), and therefore the rules on defective performance under the Civil Code apply in full. The right to a discount on the purchase price is one of the rights arising from defective performance, and the law leaves this area (between entrepreneurs) to the contractual freedom of the parties, provided that they do not violate the law or good morals. In short, what is not prohibited is permitted.

The key message of the Supreme Court is: There is nothing unlawful about two business partners agreeing that the amount of the discount on the purchase price in the event of defects will be determined by a third-party expert. Such an agreement does not contravene the law or circumvent the purpose of the legislation. The Supreme Court emphasized that the autonomy of the will of the contracting parties is a fundamental value, and if substantive law allows the determination of a discount to be left to the agreement of the parties (or an expert appointed by them), then civil procedure does not prevent this either. No provision of the Civil Procedure Code prohibits an agreement on the method of determining a discount, and such an agreement is not contrary to the principle of free evaluation of evidence by the court.

In other words: The Supreme Court rejected the view that the parties would “usurp” the court's authority. An expert is not a judge, but acts as a professional tool agreed upon in advance by the parties to calculate the discount according to their rules. This does not take the court out of the picture – on the contrary, its task is to respect such an agreement, provided that it does not conflict with the law.

However, this does not mean that the expert's decision is sacrosanct and untouchable. The Supreme Court clearly stated that if the parties disagree and end up in court, the court still conducts evidence and evaluates the evidence, including the expert's opinion. The court's task will be to verify several things:

• Whether there was any defective performance that would justify a discount (i.e., whether the sold company/share actually suffered from defects, breach of warranty, etc., and whether the buyer exercised its rights in a timely manner).
• Whether all contractual conditions for applying the discount were met (e.g., whether the buyer complied with the agreed procedure for notifying defects, deadlines, limitation of damages, etc.).
• Whether the expert complied with what the parties agreed for determining the amount of the discount – i.e., whether the expert proceeded according to the criteria and guidelines agreed in advance in the contract, and whether the result corresponds to the will of the parties as expressed in the contract.

The court will therefore not blindly accept the figure written by the expert if it sees that, for example, the expert did not comply with the assignment or that the conditions for a discount were not met. An expert opinion is evidence – strong, contractually anticipated evidence, but still only evidence. The judge may (in procedural terms) evaluate it freely, which does not mean ignoring it. On the contrary, if the opinion is of high quality and in accordance with the contract, it carries great weight and the court will take it into account.

What about unilateral set-off of a disputed claim?

The Supreme Court also ruled on the question of whether the buyer was entitled to set off its claim for a discount against the debt (additional payment of the price), even though the claim was disputed. In general, the law states that uncertain or indefinite claims are not eligible for set-off (Section 1987(2) of the Civil Code). However, the Supreme Court recalled its earlier case law that if both counterclaims arose from a single relationship (a single contract), it is fair to assess them together. In our case, both claims were closely linked by a single contract: the sellers' claim for payment of the second installment and the buyer's claim for a discount on the same installment of the purchase price. The contract expressly provided that the second installment could be reduced by the discount and allowed for set-off. In such a situation, according to the Supreme Court, it is reasonable and fair to first decide whether and to what extent the buyer is entitled to a discount, and only then to force the buyer to pay the remainder of the price. In other words, the discount and the additional payment should be offset against each other, thereby excluding the possibility that the buyer would pay the full price even if a claim for a discount had actually arisen. According to the Supreme Court, the appellate court erred in considering the claim for a discount to be non-offsetable solely because it was disputed.

Practical recommendations for contracts and investors

The case described above is a valuable lesson for anyone entering into contracts for the transfer of shares, stocks, or other transactions where liability for defects or unfulfilled expectations is addressed. What can we take away from this in practice? Here are a few tips and warnings:

• Carefully formulate the agreement on the purchase price discount. Clearly define what constitutes a defect or breach of contract giving rise to a claim for a discount. For example, specify which statements or indicators this relates to and how the discount is calculated (calculation parameters). In the case described, the contract contained detailed parameters for calculating the discount – this is good practice, without which the expert opinion could have been unclear.
• Consider a provision for the discount to be determined by an expert if you want to avoid disputes over the amount. The Supreme Court has confirmed that such a provision may be valid and is not contrary to the law. The advantage is obvious: an expert will assess the amount of the discount more objectively than biased parties. However, be careful when selecting an expert – ideally, name a specific person/institution or establish a selection mechanism so that the parties do not argue about who it will be. In our case, the company was predetermined. You can also specify that if the expert is unable to perform the task (e.g., due to a conflict of interest or the company ceasing to exist), the parties will appoint a replacement or designate a third party to appoint one.
• Do not expect the expert to resolve everything without the possibility of dispute. Even if the expert determines an amount, the other party may dispute their conclusions – e.g., by arguing that the opinion did not take something important into account. The opinion may then end up as evidence in court proceedings, where it will be reviewed by the court. We therefore warn against a false sense of security: a contractual provision on an expert is not the same as an arbitration clause. Enforcement may still require going to court.
• Pay attention to deadlines and the procedure for claiming defects. Agree on the latest date by which the buyer must report a defect and request a discount, and in what form. In our case, the deadline was four years from the effective date of the contract, with the obligation to report defects without undue delay after discovery. If the buyer missed the deadline or did not comply with the form, they would lose their claim – this would then also be assessed by the court.
• Check whether it is a consumer contract. The Supreme Court expressly pointed out that if it were a consumer relationship, such an agreement could be considered unacceptable (abusive) towards the consumer and would be ineffective. This is not a problem in business relationships between companies, but it would be a problem, for example, when selling a company to a non-business entity (a natural person who is not a business entity). Practical advice: Only use experts in B2B contracts, not if the buyer is the “weaker party” or even a consumer.
• Think about how to deal with financing discounts. It can be devastating for the seller if the buyer unilaterally fails to pay a large part of the price with reference to a discount. As a seller, consider providing security: for example, depositing part of the price in escrow or in a blocked account, from which it will be released after a certain period of time or after confirmation that there are no claims for defects. This, in turn, gives the buyer the certainty that the money for a possible discount is “set aside.” Both parties are thus better protected and avoid heated disputes over payment.
• In the event of a dispute, be prepared for an expert witness in court. If you are in the position of the buyer and are claiming a discount, expect that the court may want a revision of the expert opinion or a supplement to the original one. Have evidence of the existence of the defect itself, not just the amount of the discount. As a seller, be prepared to challenge the expert's conclusions with arguments and, if necessary, your own expert opinion. The court will examine every detail – from the cause of the defect to the methodology used to calculate the damage.

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Conclusion: Dispute prevention and expert assistance pay off

This case clearly shows that foresight when concluding a contract can save a lot of trouble, but also that a contract cannot completely exclude the role of the court if the parties disagree. The Supreme Court gave the green light to contractual agreements on experts, but at the same time reminded us that justice is upheld by the court – i.e., the final result must stand up to independent judicial review. The lesson for business owners, partners, and investors is clear: make sure your contracts are clear, well thought out, and in line with the law.

The aim of such provisions is to speed up and objectify dispute resolution, which is commendable. However, in order for them to work effectively, they must be set up correctly. Every word in a contract can determine whether you will have to spend a long time recovering your money in court or whether the dispute will be resolved more smoothly.

ARROWS lawyers are ready to help you set up contractual terms and conditions that protect your interests and prevent unnecessary conflicts. We will be happy to advise you on how to incorporate provisions on purchase price discounts or expert witnesses into your contract so that they are enforceable and valid, and we will also propose other mechanisms to minimize the risk of litigation. Do not hesitate to contact us – preventing problems is always cheaper and more pleasant than subsequent litigation. Your business deserves quality legal care so that you can trade with peace of mind.

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