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Pre-contractual liability in the Czech civil law – Misuse and disclosure of confidential information

Pre-contractual liability in the Czech civil law – Misuse and disclosure of confidential information

The topic of this article follows up to our previous articles dedicated to pre-contractual liability as a novelty of the Czech legal system introduced by the New Civil Code (Act No. 89/2012 Coll., the “NCC”) and is focused on the fourth and last merit of pre-contractual liability.

This merit of pre-contractual liability is stated in Section 1729 (1) of the NCC and establishes legal liability due to misuse and disclosure of confidential information obtained during the contractual negotiations.

The above provision of NCC relates to Section 1730 (1) and 1728 (2) of the NCC. Pursuant to these provisions one party complies with its information duty by providing the other party with relevant information for the contractual negotiations. The other party is entitled to make notes of such information (regardless of the fact whether the contract is concluded or not). In other words party is entitled to keep records of contractual negotiations, regardless of the fact whether the contract is closed or not.

Section 1730 (2) of the NCC imposes a confidentiality duty upon the recipient party with respect to the information received during contractual negotiations. At the same time the law does not provide for any definition of the term confidential information and does not even require the parties to mark relevant information as such. It follows from the said provision that the law provides for statutory protection of information, which is objectively seen as confidential, without the need to be expressly specified as such. Nevertheless it goes without saying that it is more than recommended for the disclosing party to mark which information it considers to be confidential and keep this declaration as future evidence for any later dispute.

In case of breach of confidentiality duty, the harmed party may seek compensation amounting to the unjustified enrichment on the side of the breaching party (if applicable). The harmed party may also demand compensation of damages pursuant to general statutory rules, regardless whether the negotiated contract is finalized or not. The burden of prove lies with the harmed party.

Although the implementation of the pre-contractual liability institute into the NCC can be seen as a positive move, as it will bring a greater level of legal certainty to parties during their contractual negotiations, the new law will certainly bring number of questions and interpretation issues. In this connection it is good to rephrase that the contracting parties have freedom to clarify areas which could be problematic right at the start of the negotiations process and if required sign confidentiality agreement. We also recommend keeping evidence of all negotiating correspondence and communication.

By Jiří Spousta & Magda Stárková

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