Limitations for the application of the hardship clause in the Czech Republic
Limitations for the application of the hardship clause in the Czech Republic

Author(s): Bára Mika
Subject(s): National Economy, Law on Economics, Financial Markets, Socio-Economic Research
Published by: ADJURIS – International Academic Publisher
Keywords: change of circumstances; hardship; gross disproportion;
Summary/Abstract: Since 2020, partially triggered by the pressure of the Covid-19 pandemic, the Czech courts were presented with several dozens of cases concerning possible termination or adjustment of contracts due to changed circumstances under the hardship clause. Given the relative novelty of the general hardship clause in the Czech law, the first bundle of case law presents an opportunity to see how the courts handle the application of the concept in practice. This paper focuses on the analysis of the Czech case law between 2020 and 2023, targeting the first two considerations under the hardship. Firstly, it is the question of what constitutes a change of circumstances. The point was chosen as a starting point mostly because it is the only one addressed by the Czech Supreme Court in more detail. One of the conclusions here is that the courts tend to list specific (extreme) circumstances but omit development of more universal characteristics which would help support the rule. In its second part, the article debates the effects of the change, a gross disproportion created within the contract. In this regard the courts (and also the claimants) misinterpret what should be the subject of examination, focusing on the economic struggle of the claimants unrelated to the contracts instead of looking within the contract on its damaged equilibrium. The aim of the paper is to name these general shortcomings, showing how they manifest in individual cases.

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