A common issue in commercial contracts between parties seated in different countries involves failure to clearly specify which country's laws will govern the contract and the relations of the parties thereto. In this case, the parties must resort to the conflict of law provisions of their countries for guidance.

As for the Czech Republic, conflict of law rules are contained in Act no. 97/1963 Sb., as amended. Under the provisions of this law, parties entering into an agreement with a Czech person or Czech legal entity have the right to freely make the choice of the applicable law for their relations. Obviously, this choice should then be clearly specified in the agreement of the parties. It should be noted that this law also specifies that a choice of law can be decided from the conduct of parties (per facta concludentia), however, it requires that there must not be any doubt about the expression of will of the parties.

In case the applicable law has not been selected by the parties, the above mentioned law provides guidance in the following enumerated situations: 1.) Contracts of sale and contracts of specific performance are governed by law of place of seat (residence) of the seller or of the provider of work at the time of conclusion of the contract: 2.) Contracts concerning an immovable, - by law of the place where the immovable is situated: 3.) Contracts concerning transport, - by law of the place of the seat or residence of the carrier or forwarding agent at the time of conclusion of the contract: 4.) Contracts of insurance, - by law of the place of the seat of the insurer at the time of conclusion of the contract: 5.) Contracts of commission and similar contracts, - by the law of the place of the seat of the person executing the commission at the time of conclusion of the contract: 6.) Commercial representative contracts and brokerage contracts, - by the law of the place of the seat of the person for whom the commercial representative or broker executes his activity at the time of the conclusion of the contract: 7.) Contracts concerning multilateral barter transactions - by the law, application of which, would best correspond to settlement of the relations in their entirety.

Contracts not enumerated above are generally regulated by the law of the state in which both parties have their seat. If the parties are not seated in the same state, then the contract is regulated by law of the place where the contract was concluded. If the contract was concluded between absent parties, it is then governed by the law of the state of where the acceptor has its seat. Finally, the Act provides that the relations of the parties should, subject to the above specific situations, are then to be regulated by the law, application of which, would best correspond to reasonable settlement of the contractual relation in its entirety.

Provisions of international treaties binding the Czech Republic are not affected by the above mentioned law. The Czech Republic is a contracting state of the Vienna UN Convention on Contracts for the International Sale of Goods, of Apr. 11, 1980 (with reservation, according to Art. 95 , that Czech Republic is not bound by subparagraph (1) (b) of Art. 1 of this Convention) and of number of international treaties concerning international transport.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.