Good Things Do Not Always Come to Those Who Wait
Just be sure to keep an eye on the statutory deadline. When the new Civil Code takes effect in 2014, greater attention to detail will be necessary.
When a statutory deadline expires, a claim becomes weaker. In other words, the court will not rule in the claimant’s favour if the defendant objects based on the statute of limitations. Although nothing would actually prevent the loan from being repaid voluntarily, the court cannot force the borrower to do so.
Transactions regulated by the Commercial Code enjoy a four-year limitation period while the current Civil Code imposes a general three-year limitation period. This can obviously lead to problems. The courts have already addressed some of them, including in relation to claims for unjust enrichment. Although unjust enrichment is subject to the Civil Code, case law provides for a four-year limitation period for businesses. In any case, the limitation period is fixed under the statute of limitations and the parties are not free to agree otherwise in the contract.
Change on the Horizon
The fundamental principle of the new Civil Code is the full development of a person’s free will, i.e. personal autonomy, which will be reflected the statute of limitations. Parties to a contract will be free to set a limitation period of up to fifteen years. No such arrangement, however, will be permitted to the detriment of the weaker party or of certain rights and claims, such as one’s freedom, life or health or in the case of deliberate breaches. Here of course the general correction of good morals continues to apply. Unless the parties agree otherwise, there will be a uniform three-year limitation period applicable to both individuals and businesses alike.
Allowing the parties to a contract freedom in setting the limitation period is not as unusual as it may sound. It is included in German law and in the Czech International Trade Act, which allowed the limitation period to be adjusted up to a certain limit. For the sake of completeness, note that even though parties are now subject to a prescribed limitation period, the party against whom a claim may become statute-barred may, under the Commercial Code, unilaterally extend it to up to 10 years by way of a written declaration.
Two Sides to Every Story
Allowing a limitation period flexibility via a contractual arrangement certainly has many advantages. The parties will be able to adjust the period to match the nature of the transaction and their own preferences. On the other hand, there are two sides to every story. As of 2014, you will not be able to rely on the law but will have to thoroughly examine the agreement to find out whether it specifies another limitation period. Moreover, the term “weaker party” – which is not clearly defined anywhere – perhaps also deserves criticism, since it could cause interpretation difficulties: typically, parties considered weaker do not only include consumers but also minors or individuals with limited legal capacity, tenants, etc. One note in conclusion: as of 2014, the terminology will be unified, with “lhůta” (deadline) to be the proper term instead of “doba” (time).