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Enforcement of invoices under Czech law

Unpaid invoices are a commonly occurring problem for self-employed professionals and small businesses. Several unpaid invoices (or sometimes even one) can endanger the continued operation of your business and lead to the accumulation of debt or even insolvency. How to prevent unpaid invoices and what to do if a customer fails to pay?

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4 minutes of reading
24. 1. 2020

Prevention

Whether you sell goods or deliver services under a sales , work or collaboration agreement, it is important to clearly negotiate payment terms with your client. Especially small business owners often neither conclude contracts in writing, nor do they require any confirmation of the provision of service or even delivery of goods. Such an approach creates the perfect conditions for the customer not to pay the invoice. In particular, a clearly written contract or at least a summary of the payment terms in a written order will help to avoid misunderstandings and other problems. The payment terms may also be included in the terms and conditions referred to in the main agreement.

You can determine the maturity of the price or reward both by fixing a date and by requiring that a certain condition is met, for example, by requiring that a house renovation is completed. It may also be beneficial for the client to arrange for the option not to pay the invoice, or part thereof, if the performance falls below the agreed standard. However, the maturity of the price should not be left solely to the discretion of the supplier, who would otherwise only mention it on the invoice issued, irrespective of his performance.

It is also advisable to thoroughly screen clients and business partners, requiring stricter conditions for payments and guarantees if any risks are identified.

Advance invoices

Advances are a good way to prevent bad payment discipline. The arrangement of advances should again be the subject of an agreement in a written contract. The commencement of work or deliveries may thus depend on the advance payment.

It should be noted that even if the customer does not pay the invoice, you still have to pay value added tax to the government. Therefore, it is appropriate to receive an advance payment first so that in the event of poor payment discipline at least all the necessary expenditures relating to the contract are reimbursed.

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Recovery of unpaid invoices

If, in spite of a well-written contract, the customer fails to pay the invoice, the situation needs to be resolved as soon as possible. It may be caused merely by a wrongly entered payment order that the client would not have noticed immediately without your notice. However, if he or she has financial problems, delaying recovery could only result in the invoice not being paid having to write off the claim. In any case, it is advisable to notify the client as soon as possible that he or she has not paid the invoice. If there is a delay in payment for several days, a notification by phone or e-mail will usually suffice.

In the event that the client still does not pay the amount due, it is appropriate to ask for it in writing and threaten to enforce your claim in court. Even if the terms of payment are subject to a confidentiality agreement, the disclosure of this information to your lawyer or court will not be considered a breach of the confidentiality agreement. Often, such a reminder will have a greater psychological effect than an ordinary notice and the debtor will prefer to pay rather than risk court proceedings and having to pay for your lawyer.

Jestliže dlužník přes veškerou snahu a upomínání dluh neuhradí, nezbude jiná možnost, než se zaplacení dlužné částky domáhat žalobou u soudu. Pro úplnost doplňujeme, že písemná výzva k úhradě je předpokladem pro to, aby vám soud přiznal náklady soudního řízení, pokud budete ve sporu úspěšní. Teprve po úspěšném soudním sporu bude možné pohledávku vymáhat v exekuci a přistoupit k prodeji majetku dlužníka.

If the debtor fails to pay the debt in spite of all efforts and reminders, there will be no other option than to claim payment of the amount due before a court. For the sake of completeness, we add that a written request for payment is a prerequisite for the court to award you the costs of the court proceedings if you succeed in the dispute. Only after successful litigation will it be possible to recover the claim through court-mandated seizure and sale of the debtor’s assets.

In the case of client’s payment problems, it is important to regularly check the insolvency register in addition to the active recovery of the claim. Should the customer be insolvent, the law sets relatively short deadlines for filing claims in insolvency proceedings. If your claim is not filed, it will not be possible to satisfy such claim and in some cases you could not recover it.

If you would like to write or review a contract in accordance with the new Civil Code (NOZ) so that payment terms are set correctly, please see our offer.

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Author of the article

medailonek-preuss

JUDr. Ondřej Preuss, Ph.D.

Ondřej is the attorney who came up with the idea of providing legal services online. He's been earning his living through legal services for more than 10 years. He especially likes to help clients who may have given up hope in solving their legal issues at work, for example with real estate transfers or copyright licenses.

Education

  • Law, Ph.D, Pf UK in Prague
  • Law, L’université Nancy-II, Nancy
  • Law, Master’s degree (Mgr.), Pf UK in Prague
  • International Territorial Studies (Bc.), FSV UK in Prague

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