Believing that an ambiguous sentence in a contract automatically favors the stronger party is a big mistake. Our office successfully represented a client in a commercial dispute for 10,6 million crowns, where the supplier attempted to cancel a long-term price fixing based on an isolated interpretation of one provision of the contract. The Regional Court in Prague upheld our legal argument and confirmed that the law and the true intention of the parties take precedence over wording.
Energy price dispute: When fixation stops paying off
Imagine a situation where you have a contract with your energy supplier. long-term contractIn the appendix, you explicitly you agree on a fixed price and a fixed-term commitment, until the end of 2029. For both parties, this means certainty and stability for many years to come.
However, market conditions change and the supplier concludes that the original agreement is no longer economically advantageous for him. He therefore decides to unilaterally terminate the contract. He announces that he is canceling the fixation and invoices a new, significantly higher amount for a single month. In this particular case, the difference in price for a single month was an astronomical 10,6 million crowns.
The customer, of course, refused such a "surcharge" and paid only the originally agreed amount. The supplier therefore decided to recover the missing millions through legal means.
A legal loophole that was supposed to open a back door
The plaintiff contractor based its strategy in court on an isolated interpretation of one specific sentence in the contract amendment. This provision addressed what would happen after the agreed period (i.e. after 2029). It stated that if neither party notified the contrary, the contract would be automatically extended. However, if either party notified in advance that they did not want the automatic extension, the contract would be changed to an indefinite period with a three-month notice period.
The supplier tried to purposefully twist this rule. He argued that if he made this notification during the duration of the fixation, the contract would immediately switch to an indefinite period and he could immediately terminate it, regardless of the original term (2029). According to his interpretation, the entire long-term fixation would essentially be cancelable at any time with a single letter.
Three arguments with which the court swept the purposeful interpretation off the table
The Regional Court in Prague did not agree with this argument, upheld the decision of the first-instance court and dismissed the supplier's lawsuit in full. Three arguments are particularly crucial for business practice, which the court emphasized in its judgment:
1. The actual intention of the parties prevails over the literal text
The court recalled the basic principle of the Czech Civil Code (Sections 555 and 556 of the Civil Code). A contract cannot be read mechanically and blindly adhere to individual words taken out of context. The law requires that one examines the true intention of both parties at the time they signed the contractIf both parties knew what they were pursuing by the agreement, one of them cannot later invoke a linguistic inaccuracy.
2. The key importance of pre-contractual email communication
How did the court find out what the parties really wanted when signing the amendment? Evidence in the form of email communications and comments in draft versions of the contracts that the company representatives exchanged before signing played a crucial role. These emails clearly showed that The priority of both companies was to ensure stability and unchangeable conditions until the end of 2029The court took these documents as clear evidence of the true meaning of the agreement.
3. Contractual arrangements must make logical sense
The court criticized the supplier for offering an interpretation that lacks basic commercial logic. It makes no sense for the parties to negotiate a fixed price and a fixed-term contract until the end of 2029, if they also approved a loophole that allows the entire security to be revoked at any time. The purpose of the contested provision was to resolve the transitional regime after 2029, not to provide a tool for premature escape from commitment.
The outcome of the dispute and lessons for your practice
The plaintiff supplier was unsuccessful in court. Not only did he not receive the requested 10,6 million crowns, but the court ordered him to compensate the other party for legal representation costs totaling almost half a million crowns. The original contract remains valid under the original, favorable conditions for the customer.
This ruling brings two fundamental conclusions for anyone who enters into commercial contracts:
Don't throw away drafts and emails: Pre-contractual communications, emails, meeting minutes, or notes in draft contracts are not just administrative waste. In the event of a lawsuit, they can be the most important evidence that can save your company from multi-million dollar damages.
The spirit of the covenant takes precedence: Czech courts actively protect honest business dealings. If you and your business partner agree on something humanly and clearly and this agreement results from the circumstances, the other party will not be able to successfully sue you later on for a purposeful interpretation of one clumsily formulated sentence.
If in your business practice you are dealing with the interpretation of complex contractual provisions, revising long-term contracts or facing pressure from a business partner who is trying to avoid their obligations, we will be happy to provide you with professional legal support and help protect your interests.
