What are the principles of compensation?

Quick overview

The Civil Code distinguishes between pecuniary damage and non-pecuniary damage. The obligation to compensate for damage to property, i.e. damage, is the basic rule. Non-pecuniary damage is compensated if the law so provides or if it has been expressly agreed. Damage is generally compensated by restitution and, if this is not possible or if the injured party so requests, it is compensated in money. Actual damage and loss of profit shall be covered. In the case of non-pecuniary damage, adequate compensation shall be awarded, normally in money if no other means is sufficient.

What is damage and what is injury?

Many people treat the terms ‘damage’ and ‘injury’ as identical. However, it is more accurate to distinguish. According to Section 2894 of the Civil Code, the obligation to compensate another for injury always includes the obligation to compensate for injury to property, i.e. damage. In addition, an obligation to compensate for non-pecuniary damage may also arise, but only if this is specifically provided for by law or if it has been expressly agreed.

Property damage typically means that the victim’s property has decreased or not increased, although in the ordinary course of things it would have increased. Section 2952 of the Civil Code expressly states that the actual damage and also what the injured party has lost, i.e. lost profits, are covered. So when you damage someone’s production equipment, it may not just be the cost of repairs or a new machine, but also the earnings that the injured party could not realistically have earned because of the downtime.

Non-pecuniary damage, on the other hand, refers to interference with a person’s personality and other natural rights, typically health, dignity, privacy, honour or reputation. In the case of injury to a person’s natural rights, the law expressly provides that the wrongdoer shall compensate for both the damage and the non-pecuniary damage and shall also compensate for the mental anguish caused as non-pecuniary damage.

Prevention and basis of liability

The Civil Code (CCC) also bases liability for damages on the general duty of prevention. According to § 2900 of the Civil Code, everyone is obliged to act in such a way as to prevent unjustified harm to the freedom, life, health or property of another. In some situations, there is even a duty to take active action or at least to warn of impending damage. § Sections 2901 and 2902 of the German Civil Code impose a duty to take action where the circumstances or the relationship between persons so require and a duty to notify without undue delay the breach of a legal obligation to the person who may suffer harm as a result.

In the case of ordinary civil liability, it is generally assessed whether there has been a breach of a legal obligation, the occurrence of damage and the causal link between the conduct of the wrongdoer and the damage suffered. Culpability is sometimes cited as a universal necessary condition in all cases, but this is too simplistic. § Section 2895 of the Civil Code expressly provides that in some cases the wrongdoer is obliged to compensate for the damage regardless of fault, if this is specifically provided for by law. A typical example is the liability for operational activities under § 2924 of the Civil Code.

In addition, the Civil Code provides for a presumption of negligence in § 2911 if a legal obligation has been breached. This means that the injured party does not always have to prove with difficulty that the wrongdoer acted negligently; in such a situation, the law assumes that the wrongdoer was negligent unless the contrary is proven. In the case of breach of contract, again, the special rules in § 2913 apply.

When the obligation to pay compensation does not arise

A duty to compensate does not arise automatically in every situation where someone causes harm to another: Imagine ripping someone’s jacket and breaking their nose, and even admitting that you did it intentionally, and yet no one will hold you liable for damages. How is that possible? It can happen in a situation where you are acting in necessary defence, i.e. where the person attacked you first in a similar way and you are just defending yourself. The emphasis on “in a similar manner” is quite appropriate here. If you were threatened with only minor harm (for example, if someone bumped into you on a tram and you failed to control your emotions, knocked him to the ground and, in a fit of rage, smashed his designer glasses), you would certainly not be able to use the necessary defence.

According to Section 2905 of the Penal Code, one who repels an imminent or ongoing unlawful attack on himself or another and in doing so causes injury to the attacker is not liable for compensation. This does not apply, however, if it is obvious that the attacked person was threatened with only slight harm or that the defence was manifestly disproportionate. § Section 2906 of the Civil Code similarly regulates extreme hardship: whoever averts a directly imminent danger of harm is not obliged to pay for the harm caused by it, unless the danger could not have been averted otherwise and a consequence obviously as serious or even more serious than the imminent harm did not result. An example would be breaking the window of someone else’s burning house to rescue small children from it.

In practice, these exceptions are mainly encountered where the client intuitively feels that they have “damaged something, but it was necessary”. It is here that the reasonableness of the defence or whether there really was no other way to prevent the impending damage needs to be carefully assessed.

How to claim compensation

Most compensation disputes do not start in court, but with a pre-action notice. It is advisable to invite the claimant in writing, describe the damage event, quantify the claim and support it with available evidence. If the plaintiff does not comply voluntarily, a civil action follows.

In court proceedings, the victim must then generally allege and prove the relevant facts: how the damage occurred, what damage was caused, who is liable and the causal link between the conduct of the pest and the damage. The precise qualification of the claim is also important: the breach of a legal obligation under Section 2910 of the Civil Code is treated differently, the breach of a contractual obligation under Section 2913 of the Civil Code is treated differently, and special cases of strict liability are treated differently.

Example from practice

In practice, we often encounter the situation where the injured party “knows that someone has caused the damage”, but is unable to establish his claim in law. Typically, he or she will provide a photograph of the damaged item, but no longer addresses how to prove the amount of actual damage, the loss of profit or the link between the specific conduct of the harmed party and the damage suffered. This is where the difference between a mere sense of injustice and a successful claim tends to be.

Multiple tormentors and victim’s complicity

If more than one person has caused the damage, the Civil Code, § 2915, is based on the rule that the injured parties are jointly and severally liable for the damage. Only in special cases may the court decide that they shall compensate according to their participation in the harmful consequence. Subsequently, the damagers settle among themselves in accordance with § 2916 of the Civil Code and the one who is liable for the damage caused by another person has a remedy against him according to § 2917 of the Civil Code.

At the same time, however, the conduct of the injured party must also be taken into account. § Section 2918 of the Civil Code provides that if the damage has been caused or increased also as a result of circumstances attributable to the injured party, the obligation of the injured party is reduced proportionately. In layman’s terms: if the injured party has significantly “helped himself” to the damage, this may reduce his claim.

How is compensation paid?

The basic principle is set out in Section 2951 of the Civil Code. The damage is compensated by restoring the damage to its previous state. If this is not feasible or if the injured party requests it, the damage is compensated in money. In the case of non-pecuniary damage, adequate compensation is to be provided; it must be provided in money if no other means can provide real and sufficiently effective reparation for the damage.

This is also important in practice. The injured party does not always have to be referred to a ‘repair’ or ‘replacement’. Monetary compensation may be appropriate, and in the case of interference with personality rights, an apology, retraction of a false statement or other means of satisfaction may be appropriate if they are genuinely sufficient. If it is not sufficient, financial satisfaction is the way forward. Special circumstances, such as intentional infliction of harm, use of threats, abuse of dependence or discrimination, are to be taken into account in determining the amount of compensation pursuant to Section 2957 of the Civil Code.

In the case of damage to property, Section 2969 of the Civil Code is also practically relevant. This states that the normal value of the thing at the time of the damage is to be taken into account and what the injured party must reasonably spend to restore or replace the function of the thing. This is a more accurate starting point than the simple notion that only the “market value of the thing” is always paid.

Practical example

In the event of damage to a car or other commonly used item, clients are often faced with the question of whether they are only entitled to the “value of the old item” or also to the reasonable costs of repair. This is where the key issue is whether the repair is cost-effective and actually restores the function of the item. In the case of damage to an item, therefore, it is not only the book value that is at issue, but also the actual cost of restoring it to a usable condition.

As mentioned above, it is not only the direct damage that is covered, but also the loss of profit. However, it is worth pointing out that it is not enough to claim lost profits in general terms. It must be reasonably established that the injured party’s assets would actually have increased in the normal course of things had the damage not occurred. The law expressly recognises this item in section 2952 of the Civil Code, but it is more difficult to prove than actual damage.

Limitation of damages

In some cases, you know about the damage and the pest at the time it occurs. This is evident, for example, when a colleague spills coffee on your computer. But many cases are not this obvious. For example, when you come to your car in the shared garage after a week, you find it damaged, but you identify the person who caused the damage a few weeks later. It is these circumstances that affect the statute of limitations on damages.

A claim for damages is generally time-barred under the general statute of limitations and the special rules for damages. In particular, it is important that the injured party must know not only about the damage but also about the identity of the injured party in order for the subjective time limit to begin to run.

The injured party should not delay in bringing his claim. As soon as he knows that he has suffered damage and who is liable for it, the so-called subjective time limit for bringing a claim starts to run. At the same time, there is an objective limit, after which the claim is time-barred, even if the victim learns about the wrongdoer later. If, however, the wrongdoer has enriched himself at the expense of the injured party by an unlawful act, the injured party may, even after the right to compensation has lapsed, seek the recovery of what the wrongdoer has obtained under the rules on unjust enrichment.

Waiver of the right to compensation

In general, the Civil Code (CCC) allows in certain circumstances the possibility to waive or contractually limit the future right to compensation. However, the provisions of Section 2898 of the Civil Code must be borne in mind. This states that an agreement which excludes or limits in advance the obligation to compensate for damage caused to a person’s natural rights or caused intentionally or through gross negligence shall not be taken into account. Similarly, an agreement which excludes or limits in advance the right of the weaker party to compensation for any injury shall not be taken into account. In such cases, the right to compensation may not even be validly waived. The frequent assertion that a future right ‘can be waived’ therefore needs to be significantly corrected.

Legal arrangements for compensation for damages

The Civil Code is the basic regulation for ordinary private law disputes. It regulates general liability for damages, specific facts and the manner and extent of compensation. There are, of course, other provisions in addition to this, such as the Labour Code for employment relations or the Code of Criminal Procedure for the victim’s claim in adhesion proceedings. However, the key point for this article is that most common situations between private parties will be based on the Civil Code.

Compensation for damages under the Civil Code (CCC)

The Civil Code provides that whoever causes damage to another is obliged to compensate for it. Compensation for damages under the Civil Code may consist of both restoration to the original state and monetary compensation if restoration to the original state is not possible or expedient. The Civil Code also distinguishes between compensation for material damage (e.g. destruction of property or loss of profit) and non-material damage (e.g. damage to honour, health or personal reputation). The burden of proof is also important – the injured party must prove the occurrence of the damage, the wrongful act of the wrongdoer, causation and fault. Exceptions are cases of so-called strict liability, where liability for damage is asserted without fault (e.g. operators of means of transport).

If the injured party and the victim do not reach an out-of-court settlement, the claim may be brought in civil proceedings. The legal process is governed by the Code of Civil Procedure and the emphasis is on proving all the conditions for liability. The claim must be precise and supported by evidence, otherwise it may be dismissed.

Compensation in criminal proceedings

Criminal damages, also known as adhesion proceedings, are a specific area. The injured party can claim damages directly in the context of a criminal trial – for example, during the trial of a crime of fraud, personal injury or damage to property.

The court may decide on damages in the context of a criminal conviction if there is sufficient evidence to do so. If not, the victim is referred to civil proceedings. The due date for payment of compensation in criminal proceedings is also important, as it is only after the judgment awarding the damages has become final.

Compensation for damages under the Labour Code

Compensation for damages is dealt with by the Labour Code when the damage is caused by the employee to the employer or, conversely, by the employer to the employee. The law sets out specific rules for determining the amount of compensation and the degree of fault. For example, an employee is liable for damages up to 4.5 times his average monthly earnings, unless he caused the damage intentionally or under the influence of alcohol. Conversely, the employer is obliged to compensate the employee for damage caused by an occupational accident or disease, including compensation for loss of earnings and pain and suffering.

Summary

In Czech law, compensation for damages is governed by the principle of restitution or financial compensation if repair is not possible. The injured party must prove the wrongful act, the occurrence of the damage and the causal link. The fault may be intentional or negligent, unless the law provides otherwise. There are situations in which liability for damages does not arise, for example in cases of necessary defence or extreme emergency. A claim for compensation may be brought out of court in the first instance and, if unsuccessful, by legal action. The limitation period is governed by the Civil Code and, if it is exceeded, the claim for compensation is extinguished.