Legal consequences of violation of agreed written form of amendments to contract

On the other hand a view prevails that oral amendment to such written contract shall be held invalid (null and void). The above view has been formed based on Section 40 (2) of the Civil Code, which stipulates that “A contract concluded in writing can be changed or cancelled only in writing”, as well as based on Section 272 (2) of the Commercial Code, which determines that “If a contract concluded in writing contains a provision that it may be changed or cancelled only by written agreement of the parties, the contract may be changed or cancelled only in writing”. The latter cited provision is considered mandatory, i.e. it is a provision which cannot be modified based on discretion of the contractual parties. In case of breach of any of the above cited provisions the predominant opinion was that such oral amendment shall be considered invalid due to conflict with law.

On July 12, 2011 the Constitutional Court of theCzechRepublic(hereinafter referred to as the “Constitutional Court”) issued a decision on constitutional complaint, the reasoning of which is considered controversial in relation to previously settled thesis on violation of written form of amendments to a contract containing provision on its change by written amendment only.

In the respective decision No. I.ÚS 1264/11 the Constitutional Court stated, inter alia, the following: “…a contract concluded in writing containing provision on its amending only in writing can be amended in other form as well (for example by oral legal acts), provided such amendments are not challenged as relatively invalid in due time; this conclusion does not apply to contracts the form of which is stipulated by law.”

In the above legal matter courts on both levels (i.e. court of first instance and appellate court) were dealing with a question of amending of contract for work, concluded pursuant to respective provisions of the Commercial Code. In the abovementioned contract for work the contractual parties have agreed on amending of the contract only on the basis of written amendments. Subsequently they concluded oral amendment to this contract by means of which amendment the contractual parties have modified the extent of subject of the work in accordance with modified project documentation.

The reasoning of the above decision of the Constitutional Court is based on legal theory and respective provisions of both the Commercial Code and Civil Code governing so-called relative invalidity of legal acts. In line with these provisions theConstitutional Courtderived its reasoning based on the premise that prior to formation of a contract there is an offer for conclusion of contract from the part of offeror and acceptance of the offer from the part of acceptant. This involves two separate legal acts, whereas only the respective addressee of one of these legal acts can object relative invalidity of such legal act within respective limitation of time. In order to support the above argumentation the Constitutional Court stated that “Provided that the justified party, i.e. the party which is protected by provisions governing relative invalidity and thus entitled to object relative invalidity, considers the legal act satisfactory and acceptable, the law should not limit this party´s discretion and will in more than necessary extent.

In other words, the Constitutional Court of CR, although it does not follow explicitly from the reasoning of the above decision, preferred contractual freedom and discretion of the contractual parties, and Section 40a of the Civil Code on relative invalidity is considered to be as lex specialis in relation to mandatory provision of Section 272 (2) of the Commercial Code (cited above). The Constitutional Court of CR argued that even though provision of Section 272 (2) of the Commercial Code constitutes a mandatory prohibition against change of written contract (which contract stipulates that it may be amended only on the basis of written amendment) by oral amendment, consequences of breach of such prohibition are governed by Section 40a of the Commercial Code, based on which violation of an agreed form of legal act is sanctioned with relative invalidity of such legal act.

Based on the above, the Constitutional Court of CR has considered an oral amendment of contract containing reservation of written amending as relatively invalid legal act, i.e. an act the invalidity of which can be asserted by offeree, as an addressee of an oral offer for conclusion of the amendment, or by an offeror, as an addressee of an oral acceptation of its oral offer. The statutes of limitation is three years as regards contracts concluded under the Civil Code or four years as regards contracts concluded under the Commercial Code. In case of vain lapse of the respective statutes of limitation a relative invalidity cannot be claimed anymore.

Conclusion made by the Constitutional Court of CR summarized in the above decision can be considered debatable mainly from practical point of view, as the possibility to change contract concluded in writing by oral amendment may lead to increased legal uncertainty between contractual parties. Furthermore, such view on amendments of written contract may result in aggravation of burden of proof in court proceedings on the part of the participant obliged to prove existence of such oral amendment. Therefore, it will be interesting to observe whether the above outlined view of relative invalidity of oral amendment to written contract with reservation of written amending will be adopted also by Slovak courts or an absolute invalidity of such amendment due to conflict with law shall endure.