Withdrawal from a Contract

When can you cancel a contract?

Sections §2001 to 2005 of the 89/2012 Act of the Civil Code regulate withdrawing from a contract only in general. A valid reason must always exist; the parties can’t cancel an agreement on a whim. The law defines these reasons; alternatively, they may be stipulated in the contract itself.

Unless your contract defines its own provisions for withdrawal, you may back out of it only under the following circumstances:

a) The contract is breached

Let’s illustrate with a model situation: You enter into a purchase contract regarding a bicycle with suspension forks and a light aluminium frame. You sign the contract in a brick-and-mortar shop; however, upon delivery, you find out that the bicycle doesn’t have these features. This is clearly a breach of the contract, as the seller knew at the time of the contract signing, or at least must have suspected, that you wouldn’t have entered into the contract had you anticipated receiving a bicycle without suspension forks and a light aluminium frame.

b) Delay in contract fulfilment

Another reason for withdrawing from a contract is when the other party significantly delays its fulfilment. For instance, you’ve signed a contract for a painter to paint your flat. However, the painter fails to commence work for an extended period of time, which prevents you from, e.g., proceeding with the flat reconstruction. This is undoubtedly a significant delay in the contract fulfilment – had you known this from the start, you wouldn’t have signed it at all.

c) Faulty performance

Contracts must be fulfilled duly, i.e., without faults. If a fault represents a significant breach of the contract, the purchasing party has the right to choose one of the following: have the fault removed, either by obtaining a new product or repairing the present one, a discount from the purchase price, withdraw from the contract.

To illustrate, if you receive a product that doesn’t have the required or advertised features that you ordered (e.g., you purchase a smartwatch with GPS, but the GPS module is absent), then the contract has been breached.

d) Withdrawal from consumer contracts

When you enter into a contract remotely (via the Internet or a phone) or outside of usual commercial premises (at your home, in the street, on an excursion organized to promote some products…), or if you sign a consumer credit agreement, you become a consumer in legal terms and have the right to back out of a contract without stating the reason. You may do so within 14 days of the product delivery or of entering into it if it’s a service.

A man signing a withdrawal from a contract

Ordering goods from an e-shop and finding them to your disliking is a typical example; you may return such a product at your own expense. Several exceptions to withdrawal exist:

• a tour contract,
• newspaper or magazine subscriptions,
• products that deteriorate rapidly – e.g., groceries or fresh flowers,
• custom-made products,
• products removed from their hygienically sealed packaging – e.g., a toothbrush, contact lenses or packaged food,
• CDs and DVDs (if you break their original packaging),
• services such as transport, boarding, free-time activities, etc., as long as these are purchased for a particular date.

The forms of contract cancellation

The Czech civil code doesn’t define a particular form of the repudiation of a contract; nonetheless, it depends on its type. Whenever the law states an agreement must come in writing (e.g., a property purchase contract), so must the withdrawal.

The withdrawal must clearly identify both parties as well as the particular contract that is being cancelled; moreover, it must specifically state that the agreement is being repudiated. Although the law doesn’t require the reason to be stated, we recommend doing so.

Your Attorneys Online advise: Send the withdrawal from a contract as registered mail with delivery receipt; in case of a dispute, you’ll have the evidence that the document was delivered to a particular person at a particular time.

The consequences of cancelling a contract

The withdrawal comes into force at the moment of informing the other party about it, either by word of mouth or by delivering a written document. You can’t change your mind once this is done – when the repudiation is delivered, the contractual rights and obligations become null and void.

Both parties must return to each other anything that has already been performed, so, for example, if you have already received the product, you must return it, and the other party must provide you with a refund. Even if you withdraw from a contract, you still must pay any contractual fines, late charges due or damages for breaching a contractual obligation.

An example from our practice: Our client ordered stables to be built, however, the builder didn’t construct them. As a consequence, our client cancelled the contract. As a result, the builder had to reimburse him for the loss of profits stemming from horse stabling, which had already been booked.

What to keep in mind when withdrawing from a service

If a portion of the service has already been provided with your consent, you must pay for it proportionally. However, the provider must inform you about this, or must have your consent prior to completing your binding order; if they don’t, you needn’t pay anything.

What other cases of contract withdrawal have we covered in previous articles?

• Property purchase contract cancellation,
• withdrawal from a contract for work,
• repudiation of a lease,
• a vehicle purchase contract withdrawal.

These situations may prove complicated and allow for law circumvention. We’ll gladly provide a custom-made solution to your particular case.