What are the principles of compensation?

JUDr. Ondřej Preuss, Ph.D.
15. October 2024
11 minutes of reading
11 minutes of reading
Other legal issues

Did a skier hit you on the slopes and injure you? Your neighbour’s dog pounced on you and bit right into your new leather briefcase? Or did a distracted driver scrape the side of your car while parking at the supermarket? What are you entitled to in such a situation and how do you claim it?

Nehoda lyžaře, materiální škoda, náhrada škody

What’s the harm?

According to Czech law, compensable damage, or harm, can be both pecuniary and non-pecuniary. Everyone can probably imagine some type of property damage: a car accident, a spilt suit of your colleague or a broken mobile phone after you knock it out of someone’s hand on the tram are situations where damage occurs. But beware: we also include so-called lost profits in property damage, i.e. what the value of the property has not increased by, although this could have been expected in the normal course of things. So, for example, if you damage an ice cream maker’s ice cream machine, you don’t just pay for the repair of the machine itself or the purchase of a new one, but you also pay for the amount of money that the ice cream maker was unable to earn because of you.

Non-pecuniary damage can be, for example, damage to the reputation of a person about whom we have spread false information. In the case of non-pecuniary damage, the obligation to pay damages arises provided that the law expressly so provides (unless the obligation to pay compensation for non-pecuniary damage has been expressly agreed).

A number of laws contain partial legal provisions on compensation for damages, the key one being the Civil Code.

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Prevention of damage

Everyone should act in such a way as to avoid causing harm (to property, health, freedom, etc.) to others. The general prerequisites for the obligation to compensate for damage are:

  • wrongful act (may consist of a breach of good morals, a contractual obligation or the law),
  • the occurrence of damage,
  • causal link,
  • fault (intentional or negligent).

Even negligence is sufficient for liability for damages to arise, unless the law expressly speaks of intent (direct or indirect).

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Read when a negligent act is criminal.

Circumstances preclude the obligation to compensate for damage

Imagine ripping someone’s jacket and breaking their nose, and even admitting that you did it on purpose, 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.

The second situation in which the Civil Code will excuse you from having to pay damages is an act of extreme hardship. This means that you cause harm when you yourself are averting a much greater danger. For example, you break a window to enter a burning flat to save small children.

Tip for article

See the next article for more on when your actions are considered a necessary defense.

Request for compensation

The usual way to claim compensation is to make a claim for damages. You can try to reach an agreement with the pest or make a written claim for compensation. However, it is primarily up to him or her and his or her approach whether such a claim for compensation will be sufficient.
If he refuses to compensate you for the damage, a civil action should follow.

In civil proceedings, the onus is then on you to prove all the prerequisites for compensation, i.e. the unlawful act, the occurrence of the damage and the causal link between the wrongful act of the tormentor or the harmful event and the damage suffered.

If there are more than one person, they can either be held jointly and severally liable or you can claim damages against any one of them. The pests can then make what is known as a recourse claim against each other. The court may also decide that the claimants have contributed unequally to the damage and will then be liable according to their degree of fault.

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Tip: Worried about material liability at work and thinking about insurance? Read our article to find out everything you need to know.

How is compensation paid?

In the case of property damage, the basic principle is, where possible, to restore the damaged item to its original condition (e.g. by repairing it). Only if this is not possible (for example, if the item is irreparably destroyed) or if the injured party requests it, is the damage compensated in money.

In the case of non-pecuniary damage, adequate compensation must then be quantified to ‘make good’ the damage. Compensation is usually awarded in money (unless another effective method is provided). Other appropriate means may be, for example, an apology or restitution.

The manner and amount of appropriate compensation must be determined in such a way as to take account of and compensate for certain exceptional circumstances which have arisen. These may include, for example, the use of threats, the abuse of the victim’s dependence on the person who harmed them or discrimination against the victim. The victim’s fear of a threat to his or her life or health would also be taken into account. In such cases, increased harm to the victim is presumed and compensation should be appropriate.

The relationship between compensation and VAT is an interesting legal problem. Imagine a situation where damage occurs to the item being repaired. The repairer normally includes VAT in the total price he then charges his customer for the repair. For the customer, this amount therefore represents the cost of restoring the damaged item to its original condition. There is therefore no reason why the corresponding amount should be deducted from the compensation or not be considered as part of the actual damage which the injured party is entitled to claim for. VAT is therefore also included in the amount claimed.

Tip for article

Tip: The contractual penalty can also be closely linked to damages. We have described how this can happen in our article.

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. The start of the limitation period for the right to compensation is determined by when you become aware of the damage and the identity of the damage.

From that moment on, the so-called subjective limitation period of three years starts to run, during which you can claim compensation for the damage. However, there is also an objective limitation period, which states that at the latest, the claim for compensation will be time-barred ten years after the date on which the damage occurred, and fifteen years in the case of intentional damage. If you feel that you have been wronged by the statute of limitations on damages, please contact us and we will investigate the matter.

Waiver of the right to compensation

The General Civil Code (CCC) allows for the possibility to waive or contractually limit the future right to compensation. An exception to this rule is the waiver of the right to compensation in the case of damage caused by a product defect or in the case of injury to life and limb.

Tip for article

Tip: Have you been the victim of a crime and suffered damages? Are you thinking about claiming it in criminal proceedings? What is an adhesion procedure and how exactly does it work? We have taken a closer look at this in our article.

Compensation for damages is a complex legal issue that encompasses different types of damages and situations where compensation can be claimed. The basic conditions are the existence of the damage, the fault of the damager and the causal link between the actions of the damager and the damage. It is always crucial to have detailed evidence as this is the basis on which the court or the insurance company decides on the amount of compensation. In order to protect your rights, it is always beneficial to consult with a professional who can help not only with the claim, but also with any complications throughout the process.

Legal arrangements for compensation

Compensation for damages is regulated in the Czech legal system by a number of laws, which vary according to the nature of the damage and the legal relationship between the injured party and the damager. The basic legal framework is provided by the Civil Code, which defines the general principles of liability for damages, their application and possible exceptions. However, it is also supplemented by other provisions, such as the Labour Code, the Criminal Procedure Code and special laws such as the Law on Compensation for Damages in the Field of Competition.

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).

Damages in civil proceedings

If the victim and the injured party do not agree on 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 of liability. The claim must be precise and supported by evidence, otherwise it may be dismissed.

The case law review on compensation matters, which is used by the courts to unify decision-making practice, also plays an important role. The Supreme Court’s case law often helps to determine the amount of appropriate compensation or to clarify the boundaries between liability for damages and unjust enrichment.

Damages in criminal proceedings

Compensation for damages in criminal proceedings, also known as adhesion proceedings, is 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.

Frequently Asked Questions

What does the Civil Code say about compensation?

Compensation for damages under the Civil Code includes both material damage (e.g. destroyed property, lost profits) and non-material damage (e.g. injury to honour or health). The NCC also provides for exceptions when the obligation to compensate does not apply, for example in cases of necessary defence or extreme emergency.

What is the difference between civil and criminal damages?

In civil law proceedings, the injured party pursues his or her claim in a separate action for damages. It must prove all the conditions of liability – the occurrence of the damage, the unlawful act and the causal link.
In contrast, compensation for damages in criminal proceedings (so-called adhesion proceedings) is claimed directly in the context of a criminal trial against the perpetrator of the offence. The advantage is a quicker procedure and the possibility of obtaining compensation together with a punishment for the offender. Criminal damages become payable after the judgment has become final.

Who deals with compensation for damage caused by an incorrect official procedure or unlawful decision?

In these cases, you should contact the Department of Justice, Compensation Division. This handles claims for compensation for damage caused by the state – for example, if a court or other public authority has made an illegal decision or acted wrongly. You can ask for both financial compensation and an apology. If the Department rejects your claim, you can seek compensation through the courts.

How does the Labour Code deal with compensation?

The Labour Code and compensation specifically address the relationship between the employee and the employer. An employee is liable for damage caused by him in the performance of his duties, as a rule, up to 4.5 times his average monthly earnings. The exception is intentional or alcohol damage, where he pays everything.
On the other hand, the employer is obliged to compensate the employee for damages in the event of an occupational accident or occupational disease – in full, including compensation for lost earnings, pain and suffering or impairment of social life.

What other laws regulate compensation and is there an overview of case law?

In addition to the Civil Code and the Labour Code, there is also the Competition Damages Act, which applies to entrepreneurs injured by cartel agreements. The extensive case law on damages published by the Supreme Court is also important. This helps to unify decision-making practice and clarifies, for example, the amount of appropriate compensation or the burden of proof on the injured party.

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Author of the article

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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