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How Does Czech Law Score Against English Law?

How Does Czech Law Score Against English Law?

20.7.2012 10:27

The former belongs to the common law tradition while the latter is based on civil law. The main difference, though, is one of trust.

The common law trusts people to enter into legal relations and does not intervene, for better or worse, to a great extent. The civil law trusts us less and tells us what we can and cannot do, sometimes helpfully and sometimes rather less so.

Let us consider the basics. Two business people wish to enter into a contract. Under both English and Czech law, they will probably enter into a written contract. To put it crudely, if an English lawyer drafts the contract, he will listen to what the parties want and write it down, bearing in mind a few key principles, laws and cases. If the draftsman is a Czech lawyer, he will look into a little book and see what the law tells him about that kind of contract, which may or may not be what the parties have in mind. One-nil to English law for flexibility.

What happens if a contract fails to fulfil the characteristics required by law or, if it is a novel type of contract, is not sufficiently clear? For example, a non-residential lease contract provides for a monthly payment from the lessee but does not split this into rent and service charges. Under Czech law, the contract will be invalid or non-existent. Under English law, an insufficiently clear contract will be void for uncertainty but, before reaching this conclusion, the court will try to make it work by implying into it terms which reasonable business people would have included. Two-nil to English law.

But take the normal practice of amending a contract after its execution to take into account changed circumstances. The parties to a Czech law contract will enter into a simple amendment agreement. The parties to an English law contract will, however, need to provide new consideration (each party either provides an advantage to the other or suffers a disadvantage itself), because the amendment agreement is a new contract. That is, unless the parties use a special form of agreement called a deed. Forget the consideration, and you have not amended your original contract. Czech law scores on practicality: two-one.

Writing, writing everywhere

Written form is another point in hand. English statute provides that certain kinds of contract must be made in writing. Examples include contracts for the disposal of interests in land and financial instruments such as promissory notes, as well as certain consumer credit agreements. Other types of contract, like guarantees, merely need to be evidenced in writing. This rule, which dates from 1677, was intended to make life difficult for those seeking to sue under a guarantee which they fraudulently claimed had been granted orally. The requirement for written form is exceptional and imposed only where there is a good reason for it. Is that the case with Czech law? To me, faced with a seemingly huge range of contracts which must be in writing, from licence agreements to contracts for the operation of motor vehicles, the answer seems to be no. With the score at three-one, Czech law should be getting nervous.

And then there are notarised signatures. These are not so commonly required under Czech contract law as is written form, although, for instance, if you are selling an ownership interest in a Czech private limited company (an “s.r.o.”), both parties’ signatures will need to be notarised. But to incorporate change the details of or dissolve a company under Czech law, all filings with the commercial register will require a notarised signature. And when incorporating a company in England? You provide a statement to the registrar of companies saying that you have complied with the law and, if he agrees, the company will be incorporated. At the final whistle: four-one to English law.

And we have hardly begun. What about the terms of the contract and their interpretation, the parties’ obligations and the consequences of breach? How can you terminate and what are the results? More next time. Perhaps, though, in the great British tradition of fair play, I should state that Czech law is getting better all the time. The new civil code and corporations act, which will come into force in a year and a half, put much greater emphasis on freedom of contract. But, in the end, the law may be a bit like an English lawn: water it, cut it, water it, cut it and three hundred years later, you have one.

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