Improper performance of the contract and statutory and contractual liability

In business transactions, apart from documenting transactions with invoices, additional agreements are often used that regulate mutual obligations of the parties under civil law. As a rule, such contracts are concluded in order to keep them. However, as practice shows - it can be different. So what is the responsibility of the entrepreneur for non-performance or improper performance of the contract?

Obligation to perform the contract

By concluding the contract, one party undertakes to provide the other party with a specific service. If the debtor (performer) meets the obligation - the contract usually expires. However, there are situations when the debtor does not perform the service at all or performs it incorrectly. Such circumstances usually have negative consequences for both parties. The creditor does not receive a benefit on time that he could use in full, and the contractor will certainly be held responsible for failure to comply with the concluded contract. Contractual liability concerns damage to property. The debtor is responsible for any fault, even unintentional (e.g. gross negligence) and also for the tasks entrusted to third parties. In the event of impossibility to perform the performance from the beginning (e.g. action unenforceable in the light of nature) or if the other party contributed to the non-performance or improper performance of the provisions of the contract, the debtor is liable under the provisions of the Civil Code. The obligation does not arise in general, expires or, in the case of mutual obligations, it is possible to withdraw from the contract.

Responsibility for non-performance or improper performance of the contract

Failure to perform the contract takes place when the performance contained in the contract is not fulfilled at all. If, on the other hand, the debtor undertook the activities specified in the contract and performed them, but in a manner inconsistent with the contract - the creditor's interest was not satisfied in the manner required by the contract - then the contract is considered improperly performed. An example of such a situation is failure to meet the deadline for delivery of the service specified in the concluded agreement of the parties.

The contracts in question are concluded on civil law grounds. The rules of their functioning are therefore determined by the provisions of the Civil Code. Article 471 states that: The debtor is obliged to repair the damage resulting from non-performance or improper performance of the obligation, unless the non-performance or improper performance is a consequence of circumstances for which the debtor is not responsible. Another article of the code says that: If nothing else results from a specific provision of the Act or from a legal act, the debtor is responsible for failure to exercise due diligence..

Therefore, in principle, the liability for non-performance or improper performance of the contract rests with the debtor. However, if there are circumstances that prevent the performance of the service (e.g. actions unenforceable in the light of the laws of nature), the original impossibility causes that the obligation does not exist.

Contractual penalty and damages and improper performance of the contract

A party that has not received a benefit from the debtor in the form in which it was provided for in the contract may claim compensation for property damage incurred in connection with a culpable failure to perform the obligation. In practice, the penalties for withdrawing from the contract or its improper performance are already specified in the originally signed contract. The very nature of the contract is primarily aimed at securing the interests of both parties in the best possible way.

Establishing a penalty in the content of the contract for failure to comply with the obligations of one of the parties facilitates the recovery of compensation also in court. The contract already clearly specifies the amount of the damage that may be suffered. By signing the contract, both parties accepted its content. The contractual penalty is therefore also one of the incentives mobilizing the debtor to act in accordance with the contract.

If the amount of the penalty is not specified in the contract, the creditor still has the right to seek compensation from the debtor who has failed to pay the benefit properly or at all. Compensation is then sought in court, the duration of which may be longer than in the case of pursuing contractual penalties.

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The amount of the contractual penalty and compensation

The reservation in the content of the contract of the amount of the penalty for failure to perform or improper performance of it does not always mean that the creditor is actually entitled to this amount. In certain situations, the debtor has the right to apply to the court to reduce the contractual penalty. The most common reason for applying for a penalty reduction is the fact that a large part of the obligation has been met or the inadequate overstatement of the amount of the penalty compared to the amount of losses resulting from the debtor's failure to meet the obligation.

It is worth protecting yourself against non-performance or improper performance of the contract during its creation and setting its terms. At this stage, it is necessary to consider what violations should be sanctioned and how, and to determine the value of penalties that the party will be entitled to for specific consequences. This will largely facilitate the settlement with the debtor in the event of a breach of the contract and will speed up the course of a court case, if such is initiated.