In our legal practice, we review and prepare dozens of standardized contracts, terms and conditions, and other documents used by sellers – particularly in the automotive sector – when contracting with customers in the Czech market. While the saying “simplicity is beauty” certainly holds true, this principle has its limits. In this article, we take a closer look at where those limits lie.
Everything begins at the very start
Most major brands rely on a distribution model, and while customers may never notice it, authorization documents are a cornerstone of this system. These documents define who can join the brand’s distribution network and, once specific requirements are met, who receives authorization to sell products or provide services in a particular region.
For distributors, it is essential that their documentation mirrors their commercial strategy (whether it concerns showroom standards, customer-handling requirements, or the presentation of the brand). What is frequently underestimated, however, is the need to keep these documents fully compliant with competition law. Even a small, well-intentioned tweak can, once incorporated into the text, trigger serious issues and potential fines from regulators. We therefore draw attention to these risks on an ongoing basis, both on our blog and through the Distribution Law Center, where our firm is an active member.
Importantly, competition law does not prevent distributors from exercising strong oversight of their distribution networks. With well-prepared and detailed documentation, they can rely on clear and effective legal mechanisms to enforce compliance. Drawing on our extensive experience, we help clients both create robust authorization documentation and enforce the rules it contains in practice.
Clarity above all else
Anyone who has ever had to read through an entire set of contractual documents – for example when shopping online or signing up with a telecom operator – knows how much a clear and well-structured contract package is appreciated.
In reality, however, achieving such clarity is far from simple. As soon as a business deals with consumers, the Civil Code, the Consumer Protection Act and other related regulations require a long list of mandatory disclosures that must appear directly in the documentation. These include everything from pre-contract information and withdrawal forms for trial sale contracts to a number of less familiar obligations that cannot be satisfied by a mere reference to statutory provisions.
If a business operates in both the consumer and B2B environment, it is not bound by the same obligations when dealing with corporate customers as it is with consumers. In business relationships, sellers often aim to secure a stronger contractual position than the default legal regime would give them. In other words, sellers may grant business customers significantly fewer rights than consumers.
The same applies when purchasing a new car. Given the high value of the transaction – today even standard models often cost several hundred thousand Czech crowns – any minor defect can quickly become financially significant. Importantly, the law does not differentiate between whether the subject of the purchase is a mobile phone worth a few thousand crowns, a boat worth millions, or a car. Clear and precise sales documentation and a well-defined process for addressing potential defects (including, for example, the express exclusion of certain claims that the seller is not obliged to provide under the law or a contractual warranty) can ultimately save the seller not only considerable costs but also the time otherwise spent handling trivial issues.
Robust sales documentation must therefore address both the post-performance phase (for example, by clearly defining the warranty, including limiting the buyer’s claims solely to repair of the purchased item, or by introducing clauses preventing systematic resale outside the authorized distribution network) and the period preceding delivery (such as the structure and purpose of an advance payment, the ability to adjust delivery dates in response to market conditions, or the reinforcement of key obligations through appropriate contractual penalties).
Terms and conditions – a helpful tool, but only if used correctly
Relying solely on uniform terms and conditions is never enough. No matter how carefully and precisely the terms and conditions are drafted, they cannot be relied on blindly. Without proper links to other sales documents concluded with the customer (such as the purchase agreement, handover protocol, and similar documents), terms and conditions may prove entirely ineffective due to the rules on so-called “surprising provisions.” We therefore look at distribution not only from a legal perspective but also through a commercial lens. Together with our clients, we design fully integrated sets of documents that function seamlessly in practice and support the entire sales process.
As with any system, a distribution network is only as strong as its weakest element. If sellers are not familiar with what the documents actually mean or how the legal framework operates, even the most sophisticated system may fail. To address this, we provide customized training where we combine legal fundamentals with the practical realities of operating within a distribution network.
At HAVEL & PARTNERS, our dedicated automotive team brings together specialists in contract law, competition law and economics who closely track market trends and legislative developments. We are prepared to offer full legal support in designing, building, and managing distribution networks, whether for the sale of motor vehicles or for the delivery of related services.
