Czech Republic: The provisions of the new Civil Code also affect the ways in which parties may agree on the price for work
The agreed price for work is a price whose amount has been agreed with sufficient specificity (at least in terms of the method or manner in which one arrives at the price for work, and be it in the form of an estimate). Where no price has been agreed, it is held that the work price is equal to that price which one would have to pay, at the time of contracting, for the same or a similar work on comparable contractual terms.
The price may agreed in the form of a fixed amount. If so, then the contractor is not entitled to unilaterally increase the price at a later time, nor may the client demand a reduction of the price. This also applies to cases in which the price for work has been agreed by way of a reference to what is known as a comprehensive quote (i.e., a quote that lists all cost items). However, if absolutely exceptional circumstances were to occur that could not have been foreseen and that hamper the completion of the work to a substantial degree, and the parties cannot reach consensus on a price increase, then the contractor may ask the competent court to determine a fair price (or, as the case may be, cancel the contract for work and order the mutual settlement of the parties’ outstanding claims and obligations). This recourse to the courts is not available, however, if either party has expressly represented in the contract that no such circumstances will occur or, as it were, expressly accepted the risk of a change of circumstances.
If the parties agree to determine the work price based on a quote (i.e., a cost estimate) for which no guarantee in terms of completeness or of the quote’s binding character has been given, the contractor may unilaterally increase the price if higher expenses are shown to be unavoidable and the contractor notified the client promptly of this additional cost. However, a price increase by more than 10% of the original price entitles the client to withdraw from the contract.
In the case of an open quote (i.e., a cost estimate for which no guarantee for completeness is given), the contractor may increase the work price by the expenses for performances which were not included in the original quotation as they could not be foreseen at the time of contracting. In the case of a quote that was submitted with the reservation of a non-binding estimate, the contractor may increase the work price by purposefully made expenditures which unavoidably exceeded the expenses included in the estimate. If the client does not accept this price increase, then the contractor may ask the competent court to determine the price.
As long as the basic prerequisites for legal transactions are met, the parties have complete freedom when it comes to agreeing on a method for determining the price, and may deviate from (or in fact rule out) the statutory arrangement.
Libor Ulovec, Senior Associate