Presumptions and fictions of law are a traditional legal institution which is regularly used also in contract drafting; practically everyone of us has at some point encountered one alternative or another of these concepts.
Presumptions are further divided into rebuttable and non-rebuttable presumptions (whereas there is only one kind of legal fiction). All of them serve the common purpose of bringing legal certainty in a concrete situation by taking the place of a factual state of affairs which is uncertain or which did not occur (but could or should have occurred, but was no guaranteed to materialize).
In the law, rebuttable presumptions are usually preceded by the words “it is assumed that”, to establish a legally relevant set of circumstances. As can be seen from the name of the concept, it may be rebutted by producing evidence (of the fact that the situation did after all occur, or did not occur), in which case, the presumption will be overridden by the facts. Typical examples from the world of contracts are the presumption that persons who enter into a legal transaction are acting in good faith, or the presumption of “implied license” within the meaning of Sec. 2376 (2) of the Civil Code. Outside of contracts, many will have heard of the presumption of paternity applying to the spouse of a child’s mother, or the presumption of innocence in criminal law.
In the case of non-rebuttable presumptions, the presumption is categorical, and cannot be invalidated by subsequent proof of the contrary. It is typically preceded by the words: “it is held that…”. This type of presumption is not as ubiquitous; it can be found e.g. in the presumed unlimited duration of leases or the presumed non-exclusivity of licenses granted (in both cases subject to, of course, an explicit arrangement by the parties to the contrary).
Finally, legal fiction describes a mechanism which conjures up a situation that has certainly not occurred – i.e., the legally relevant set of circumstances which (generally speaking) is non-existent is being artificially created. The best-known example from legal practice is probably the fiction of service: once the stipulated time period has lapsed, a notice is deemed delivered even if it was not picked up, with all the consequences that this entails (such as the commencement of the statutory time period for appealing a judicial or administrative decision). In such cases, it is completely irrelevant whether the recipient eventually does accept service of process, or even whether the recipient has never become aware of the notice. Fictions of law are usually preceded by the words “is considered”, or “shall be deemed as if”.
Contractual presumptions and fictions under previous law
In the above-described sense, legal presumptions and fictions are commonplace in a great variety of contractual contexts, precisely because the parties need to overcome the fact that a certain situation did not occur even though it should have. A typical wording is e.g.: “If the Client fails to appear at the acceptance procedure for the work in spite of the invitation, then the work shall be deemed approved and accepted by the Client without objections”. Similarly, one will regularly encounter a contractual mechanism for the delivery of notices which says things like “the notice shall be deemed delivered on the third day from the date of posting”.
Unfortunately, widespread as this practice is among commercial players and legal practitioners, it does not exactly find recognition before the Supreme Court. In its judgment of 3 December 2008 (32 Cdo 2536/2007), the Supreme Court postulates that “a legal presumption is a construct which can only be brought into life by law, and which – subject to the fulfillment of the legal conditions – necessitates the (unconditional or conditional) presumption of circumstances which cannot be with certainty said to exist, or which in fact certainly do not exist… Such a presumption cannot be established by a contractual agreement between private parties.”
Time and again, the Supreme Court returns to this pronouncement. In a judgment of 18 March 2010 (23 Cdo 5508/2007), we read: “To the extent that a legal presumption serves to overcome situations in which reality offers us no solution, it is obvious that the establishment of such presumptions, their character, and the concomitant legal consequences are the exclusive domain of the law. In this regard, the autonomy of will of contractual parties cannot expand on the regulative instruments used by the law and create new legal facts, or the legal consequences arising from them, in what would ultimately be an act of arbitrariness.”
The conclusion drawn by the Supreme Court is categorical enough (though it focuses somewhat on the procedural consequences of legal presumptions and fictions): “From a procedural standpoint, it will not do to claim that the principle of ‘What is not forbidden, is allowed’ holds true in procedural law. On the contrary, the opposite principle applies according to which agreements in deviation from the standard are possible only if they are allowed by procedural law. Because of this, a contractual arrangement which changes the rules with respect to the burden of proof – a legal institution of public civil procedural law – would only be possible if the Code of Civil Procedure provided for it. However, there exists no provision in the law which recognizes a contractual understanding on the burden of proof, and we may therefore conclude that the parties cannot enter into such an agreement. The Supreme Court has thus arrived at the view that it is not possible to agree on a non-rebuttable legal presumption and then, on the basis of the same, to deny one of the parties the exercise of its right under the law and to prove the existence of its claim.“
A tentative solution of sorts was offered by the Supreme Court e.g. in its resolution 23 Cdo 4923/2016 of 6 April 2017 which concerned a contractual understanding pursuant to which the lapse of a certain time period for commenting on the concrete state of a creative work triggered the next phase of the relations between the contractual parties (“the production of the programme entered the next stage of production”). One of the parties had invoked the above-mentioned prohibition of legal presumptions and fictions in contracts, but the Supreme Court found that it did not apply in the case at hand, since the contractual arrangement strictly concerned a specific series of interlinked steps.
In spite of this, the above-described injunctions found their confirmation in a judgment by the Supreme Court of 4 March 020 (32 Cdo 1287/2018) which made straightforward reference to judgments 32 Cdo 2536/2007 and 23 Cdo 5508/2007 (both mentioned earlier above). In the final words of the court: “a presumption of law … may only be established by force of law”, and “the establishment of legal presumptions, their characters and their legal consequences are the exclusive domain of the law.”
Of course, the fact that all the above decisions concern the legal situation prior to the large-scale recodification of Czech private law, i.e., the legal situation in force up until the end of 2013, is highly relevant.
Contractual presumptions and fictions under current law
In a decision from recent times – specifically, judgment 23 Cdo 1001/2021 of 23 March 2022 – the Supreme Court assessed a contractual clause which read as follows: “if the Client repeatedly (i.e., 2x or more) fails to appear to accept the work without good cause… then the work shall be deemed duly and timely delivered”.
Here, the Supreme Court let itself be led by the fundamental premise that the Civil Code of 2012 is primarily marked by respect for the autonomy of contractual parties, shifting the emphasis from the strictly formal aspects of the declaration of will (as was typical for the predecessor) to the actual intentions of the actors. In the view of the Supreme Court, this must hold true also for arrangements between parties which use such phrases as “shall be deemed”, “shall be interpreted to mean”, “it is held that”, etc.
The Supreme Court further inferred that one would first have to review whether the option to enter into such an arrangement is prohibited by the law or whether the agreement is compatible with non-mandatory provisions of statutory law (i.e., in other words: whether there exists an explicit prohibition by law; whether the agreement is in conflict with the good morals, the public order, or rights of personal status; and whether the agreement runs counter to the law – in each case where this is required by the spirit and purpose of the law).
But even where an agreement passes the test of these criteria, says the Supreme Court, one must still review what kind of relative position the parties enjoyed at the time of contracting. Were they both equals (e.g. in the role of business undertakings)? Or was one of them the weaker party (be it a consumer, or a business with less power)? In such a case, one would have to examine the concrete understanding between the parties by the yardstick of the statutory provisions, to ensure that one party does not abuse its standing at the expense of the other. To the extent that the legal transaction violates the good morals, corresponding corrective measures will have to be applies also to relations between two business undertakings.
By way of summarizing the issue, the Supreme Court noted: “Agreements between parties in a private-law contract which express the anticipated legal consequences through certain typical turns of phase (such as “is deemed to be”, “the Parties assume”, “it shall be held that”) that, when used in the law, generally suggest a legal presumption or legal fiction, are not automatically invalid for this reason alone. Rather, in the case of such agreements, one must in each individual case assess what kind of legal consequence is desired by the parties’ will, and whether or not the agreement is under the specific circumstances prohibited by law or contra bonos mores.”
Upshot
The conclusions drawn by the Supreme Court in the decision described last above are, on balance, a welcome development for the legal practitioner. However, note that the answer to the question whether contractual presumptions and fictions are permissible, while no longer a categorical “no!”, is still a tentative “yes, provided that…”
After all, to reach the conclusion, one must in each individual case examine the following: (1) Are the statutory provisions in question mandatory or not? (2) To what extent and in what ways are the parties deviating from the statutory standard? and, above all, (3) What is the respective status of the contractual parties? Of course, all these aspects must be reviewed in conjunction with each other. And in any case, the departure from earlier case law is limited to the purview of the 2012 Civil Code – contractual relationships which were forced before the 2012 Civil Code entered into force will still have to be assessed from the earlier, less forgiving vantage point.
Even under the new conditions of the “thaw”, it is worthwhile exploring whether the problematic presumptions and fictions could not be limited as far as possible by resolving individual issues with the help of other legal institutions – i.e., ideally, by constituting a separate legal transactions. For instance, instead of presuming tacit approval in the event of a no-show, why not agreeing on a party’s right to declare approval or acceptance of a work if the other party remains silent or does not appear for the scheduled acceptance procedure?
Source:
Resolution 23 Cdo 4923/2016 by the Supreme Court of 6 April 2017
Judgment 32 Cdo 1287/2018 by the Supreme Court of 4 March 2020
Judgment 32 Cdo 2536/2007 by the Supreme Court of 3 December 2008
Judgment 23 Cdo 1001/2021 by the Supreme Court of 23 March 2022