Czech Republic: Supply contracts

The concept of a supply contract is a broader concept under which we can subsume certain contract types regulated by Act No. 89/2012 Coll., Civil Code, as amended (the "Civil Code") which purpose and content corresponds to that of a supply contract – purchase agreement, agreement on work. With regard to delivery of services, the parties can enter in to an innominate contract (in Czech: nepojmenovaná smlouva), i.e. a contract that is not directly regulated by law, aside from the general obligatory provisions of the Commercial Code, which the parties must comply with.

Purchase Agreement

The purchase agreement, as a fairly common form of business relationship, regulates the rights and obligations of the contracting parties in the event that the seller undertakes to deliver to the buyer a movable item specified individually or in terms of quantity and kind and to transfer to the buyer the ownership of this item, and at the same time the buyer undertakes to pay the purchase price for this movable item.

The law regulates basic requirements that the agreement must contain, such as specification of the subject of purchase and the purchase price being agreed the agreement or at least the method of its additional determination, unless the parties express their willingness to conclude the purchase contract even without determining the purchase price. The law regulates the relations between the parties in rather big detail, but only some of the provisions of the Commercial Code are mandatory and the parties have wide contractual freedom. It is common that the parties end up adjusting certain specifications of the agreement, such as moment of transfer of the ownership, transfer of liability for loss and damage, claims from defects and others, mainly depending on the type of goods, which are the subject of the respective purchase agreement.

Agreement on Work

The subject of the agreement for work is the obligation of the contractor to perform a certain work for the customer and the obligation of the client to pay for the execution of this work. As with the purchase agreement, the adjustment of certain rights and obligations of the parties will depend on the type of work, that shall be subject to the agreement. It is strongly advised to specify transfer of the ownership to the works and transfer of liability for loss and damage, especially if parts of the work shall be handed over separately on multiple occasions. Other specifications commonly included in the agreement for works are lists of quality standards, procurement of material, use and nomination of subcontractors, possible advance payments, requirements for provisions of bank guarantees and others.

Additionally, depending on the type of works provided, it is advised to specify rights and obligations of the parties with regards to creation of IP rights, provision of license to such IP rights, subject to the regulation of Act No. 121/2000 Coll., on Copyright, Rights Related to Copyright, as amended.

Regarding the contractual freedom the same principle applies as for purchase agreement.

Framework agreement

When it comes to the concept of supply contracts and long-term business relationship, the parties usually opt for conclusion of framework agreement with elements of purchase agreement, agreement for works or agreement for delivery of services.

Every agreement, including the framework agreement, can refer to the general terms of conditions wither of a supplier or of the customer.