Slovakia: Prague High Court ruling offers clear guidance for Slovak M&A deal drafting
A recent ruling by the High Court in Prague (7 Cmo 21/2024) provides valuable confirmation of a principle long embedded in our transactional approach: only precise, verifiable representations tied to clearly defined obligations can serve as a valid basis for enforcement, including contractual penalties.
The Case – Precision as a Precondition for Enforceability
The case concerned a claim for contractual penalty based on alleged breach of broad, boilerplate representations in a share transfer agreement – statements about the target company's financial and legal status, including absence of loans and compliance with employment law.
The Prague High Court dismissed the claim, emphasizing:
- The vague and general nature of the declarations made them legally uncertain and unenforceable.
- The statements referred to internal status of the target company, not the transferred asset itself, creating ambiguity.
- Czech law (specifically § 553 and § 555 et seq. of the Civil Code) requires clear, actionable obligations for a penalty clause to be valid.
This ruling confirms a consistent line of interpretation: contractual penalties cannot be enforced based on ambiguous or unverifiable representations.
Alignment with Slovak Law and Practice
Although the decision is based on Czech law, its relevance for Slovak practice is direct and practical. The Slovak Civil Code applies the same fundamental rules (§ 544 et seq.), and Slovak courts regularly reference Czech jurisprudence in transactional matters.
At G. Lehnert, we have long reflected this principle in our deal documentation: we advise clients to avoid imported or vague representations and to tailor each clause to Slovak legal enforceability standards. The Czech ruling therefore confirms the validity of the approach we already apply in local and cross-border transactions.
Our Offering to MSI Global Members
For MSI member firms involved in M&A transactions involving Slovak targets or subsidiaries, we are fully prepared to assist — not only in spotting risks, but in ensuring that representations, warranties, and penalty clauses are precisely drafted and enforceable under Slovak law.
Our team regularly supports international clients and partner firms across sectors — from manufacturing to energy to technology — and can quickly step in at any stage of your client’s deal lifecycle.
Let’s Collaborate
Should you or your clients have interests or pending transactions in Slovakia, we will be glad to collaborate. We are available for legal reviews, SPA drafting, compliance checks, or local due diligence with a focus on enforceability and transaction security.
Contact MSI's local member firm G. Lehnert in Slovakia >>
