An essential element of a work contract is the identification of the parties, the subject matter of the contract (description of the work) and the agreement that the client will pay the contractor the price after the work is completed.

The contract does not have to contain the specific amount of the price, though, or even the method of determining it.^[1] However, there must be a willingness of the parties to enter into a contract for consideration between them.^[2]

In the case decided by the Supreme Court under Case No. 33 Cdo 301/2023^[3], the client and the contractor entered into a work contract, the subject of which was the replacement of the central heating, hot water metering and regulation systems in the client’s premises. The price of the work was agreed as a fixed amount and its changes were possible only on the basis of a written amendment to the contract. After completion of the work, however, the contractor informed the client of a defect in the project documentation regarding the amount of pipe to be dismantled. The difference between the project figure and the reality was almost 500%. Despite this apparent discrepancy between the project documentation and the actual state of affairs, the contractor continued with the work and only after its completion asked the client to enter into an amendment to increase the price of the work. However, the client refused.

The contractor then turned to the court, seeking a ruling on an equitable increase in the price for the work under section 2620(2).

In the case of a work contract, the court may relax the otherwise relatively harsh rule contained in Section 2620(1) that does not allow the contractor to seek a change in price because of unforeseen effort or expense, where the price was fixed^[4]. However, this corrective can only be applied where there is a circumstance, which is entirely exceptional, unforeseeable and substantially hinders the completion of the work. A relevant circumstance is a circumstance that is close in nature to a force majeure (e.g. natural disasters, war, etc.). On the contrary, such a circumstance is not, for example, unexpected higher costs resulting from increases in material prices. 

The Supreme Court agreed with the conclusion that the project documentation supplied by the client forms part of the client’s order. If the contractor finds a defect in the project documentation that constitutes an obstacle to proper performance of the work, he is obliged under Section 2594 of the Civil Code to notify the client of this fact without undue delay and to suspend the work to the extent necessary, until the order is changed.

In the opinion of the Supreme Court, when a fixed price for the work is agreed, it cannot be argued that extra work exceeding the estimated volume many times over should be treated as unjust enrichment under 2991 CC. This is not a performance without a legal reason – the legal reason is the respective work contract. The argument of “acting for the benefit of another person” was also unsuccessful, as it is excluded by the nature of the issue in the case of a work contract.

This case law should contribute to greater vigilance on the part of contractors in the performance of work. It is clear from the legal opinion of the Supreme Court that in the event of incorrectly prepared project documentation, the contractor must immediately inform the client of this fact and address the price increase in an amendment. Otherwise, they just have to trust the good will of the other party to increase the fixed price.

If you, too, are entering into a works contract – either as a client or as a contractor – and you would like to use the services of a specialist for contract preparation or legal assessment, please, do not hesitate to contact us.

[1] See the provisions of Section 2586(1) of Act No. 89/2012 Coll., the Civil Code (hereinafter “CC”)

[2] If this information is completely absent from the contract, the price paid for the same or comparable work at the time of conclusion of the contract and under similar contractual conditions is deemed to be the agreed price according to the provisions of Section 2586(2) CC.

[3] Judgment of the Supreme Court of 27 September 2023, No. 33 Cdo 301/2023, ECLI:CZ:NS:2023:33.CDO.301.2023.1

[4] According to Section 2620(1) CC, this also applies if the price is agreed upon as a fixed amount or by reference to a budget, which is part of the contract or was communicated to the client by the contractor prior to entering into the contract.