New tools for the recovery of arrears
Starting this year, the tax authorities are not limited by local jurisdiction when recovering tax arrears. At the same time, from 1 July 2025, the customs administration can use a new power in the event of an u…
Legal News [December 2024]: Supreme Court resolved dispute between client and contractor over work completion
This month, the Supreme Court addressed several noteworthy issues in civil and commercial law. One significant ruling determined that a client cannot obstruct the rectification of construction defects if the contractor proposes a solution that complies with building regulations. The Court also clarified the conditions under which members of associations may challenge resolutions. Additionally, it examined the principle of good faith in the prescription of property rights, ruling that if possession arises from a mistake, that mistake must be excusable. Finally, the Court underscored the importance of the material publicity of the Commercial Register. It confirmed that a business corporation is liable for the accuracy of registered data when a third party acts in good faith based on that information.
- In its judgment file no. 25 Cdo 3132/2023, the Supreme Court addressed the issue of the plaintiff’s delay in completing work. The case involved repeated negotiations between the parties regarding the handover and acceptance of the work. The defendant identified several defects, the most serious being a deflected load-bearing wall. Disagreement arose over the manner the wall should be repaired: the defendant demanded the construction of a reinforcing perpendicular partition as recommended by a structural engineer, while the plaintiff insisted that adding an additional support column would suffice and argued that the defect was aesthetic rather than functional. Referring to Section 2615 in conjunction with Section 2106 of the Civil Code, the Supreme Court clarified that if a contractor fails to address defects within a reasonable timeframe or declares an unwillingness to do so, the client may either request a reasonable discount or withdraw from the contract. When the client opts for repair as the method of defect resolution, the contractor bears the responsibility for carrying out the repair without requiring further consent from the client. Should the client prevent the repair from being performed under such circumstances, Section 1968 of the Civil Code specifies that the client’s delay would preclude the contractor’s delay. The Supreme Court also noted that this situation involves a precedent, granting the defendant (the client) the right to demand defect removal in a manner consistent with construction and technical regulations. Lower courts must, therefore, assess whether the contractor’s proposed repair method complies with these regulations and determine whether the contractor could be deemed in delay, in line with Section 1968 of the Civil Code.
- The Supreme Court in its judgment file no. 27 Cdo 3381/2023 dealt with the issue of standing in proceedings for the declaration of invalidity of a resolution of a board of association. The dispute involved the resolutions adopted at the general meeting of the association on 4 February 2012 and raising objections regarding their conflict with the statutes and the law. These resolutions included, among other things, the dismissal and appointment of the board of the association. In the appeal proceedings, the Regional Court in Brno decided to reverse the decision of the court of first instance and dismissed the action, as the plaintiffs lacked standing to file it. According to Section 258 of the Civil Code, any member of the association or any person with an interest worthy of legal protection may propose to the court to invalidate the decision of the association’s body for its conflict with the law or the statutes provided the invalidity cannot be addressed through the bodies of the association. The Supreme Court elaborated on the concept of an “interest worthy of legal protection,” emphasising that it extends beyond legal interests to include moral, property, or other non-legal interests. For such protection to apply to someone who is not a member of the association, the violation must be of sufficient intensity or significance. Members of the association, however, must maintain their membership status until the judgment on the case is delivered to preserve their standing. The Supreme Court determined that since some plaintiffs had ceased to be members of the association, they lost the standing required to bring the proceedings. Conversely, it acknowledged that the resolution removing certain plaintiffs from the association’s board altered their legal position and interfered with their interest worthy of legal protection.
- In its judgment file no. 22 Cdo 2163/2024, the Supreme Court addressed the issue of good faith in the possession of property rights under Section 992(1) of the Civil Code. The case originated when the District Court in Rychnov nad Kněžnou dismissed the plaintiff’s claim to ownership of land in the cadastral area of Bolehošť, finding that the plaintiff was not in good faith regarding their ownership of the property. The Regional Court in Hradec Králové overturned this decision in the appellate proceedings, ruling that the plaintiff was indeed the rightful owner, having met the conditions for acquiring the land through prescription. However, the Supreme Court disagreed with the Appellate Court’s conclusions. According to the Civil Code, possession eligible for prescription must be honest (Section 1089 in conjunction with Section 992(2)) and genuine (Section 993), though it does not need to be “proper” as defined by Section 991. However, honest and genuine possession must be based on a valid legal basis—such as a purchase contract—that would suffice to establish ownership if the transferor held the right to transfer. Moreover, an honest and genuine possession requires the holder’s mistake about a legally significant fact or right to be excusable. An excusable mistake is one that arises despite the person exercising a standard level of caution appropriate to the circumstances of the case. In this matter, the Supreme Court criticised the plaintiff for not addressing reasonable doubts about their ownership of plot no. 1694/13, particularly in connection with the adjoining land. As a result, the Supreme Court overturned the Appellate Court’s decision and reinstated the judgment of the court of first instance.
- In its judgment file no. 27 Cdo 2126/2024, the Supreme Court addressed the effects of the material publicity of the Commercial Register on the binding nature of legal acts performed by a business corporation towards third parties. The dispute centred on the validity of vehicle purchase contracts signed on behalf of the plaintiff by a member of their statutory body. According to the Appellate Court, this member had lost the capacity to serve in their role due to a conviction for an intentional crime, which, under the Business Corporations Act, resulted in the termination of their office. However, at the time the contracts were signed, the person was still listed in the Commercial Register as a member of the statutory body. The defendant invoked the principle of material publicity of the Commercial Register, claiming good faith in the accuracy of the registered data. The Supreme Court reiterated that data entered in the Commercial Register are binding on a business corporation, even if they do not reflect the actual situation, provided the third party acts in good faith. The burden of proving bad faith lies with the party asserting it. The Court referred the case back to the court of first instance to assess the defendant’s good faith under the principle of material publicity. It also emphasised the presumption of good faith established by Section 7 of the Civil Code, noting that this presumption is rebuttable with sufficient evidence.
