Few people go through life without ever coming across a contract for work (even if they may not realise it). In this article, we explain what a contract for work (smlouva o dílo) is, when it is concluded and what it should contain.
Legal framework
Contracts for work are governed by the Civil Code (občanský zákoník) in Sections 2596 to 2635. Under the law, in a contract for work, the contractor undertakes to carry out a work for the client at the contractor’s own cost and risk, and the client undertakes to take over the work and pay the price.
As the legal definition makes clear, the contractor carries out the work at their own cost and risk. This means the contractor is not entitled to payment of the price until the client takes over the work (unless the parties agree on advance payments). The contractor also bears the risk of damage to the work until it is handed over to the client.
What is a work?
A work means making a certain item, maintaining, repairing or modifying an item, or an activity with another result. The result of a work does not always have to be physical (for example, software or a website). Building, maintaining or repairing a building is always covered by a contract for work.
In practice, a contract for work is very often confused with a purchase contract (kupní smlouva). However, these two contracts are significantly different. The main difference is that a contract for work should involve an activity rather than buying a finished product. It also matters who provides most of the material needed to make the ordered item. So if you have a piece of jewellery made to measure and bring the goldsmith your grandmother’s gold for this purpose, it is a contract for work. But if you go into a jeweller’s and buy a finished piece of jewellery, it is a purchase contract.
Requirements of a contract for work
The most important part of a contract for work is a sufficiently clear and precise description of the work and its price. There is a big difference between writing “the contractor undertakes to make a painting” and “the contractor undertakes to make a painting of a winter landscape based on the attached photographs, painted in acrylics on canvas measuring 55×65 cm”. When setting the price, it is also wise to think about possible extra work (the estimate was 20 hours, but it turned out that the actual work takes 35 hours).
Price of the work
The parties can set the price of the work as a fixed amount or based on a budget. The price can also be set as an estimate, but in this case it may increase substantially. If such a substantial increase were to occur, the contractor must notify the client of the price increase without delay. If the client does not agree with this price, they have the right to withdraw from the contract. If they do not withdraw, they are deemed to agree with the price.
For a price based on a budget, the law distinguishes between several types of budget.
Budget whose completeness is guaranteed by the contractor
In this case, neither party can ask for a change in the price, even if the contractor had to put in different effort or incur different costs than originally expected. If there are exceptionally unforeseeable circumstances that make completing the work more difficult, a court may decide on a fair increase in the price or on cancelling the contract. The same applies if the contractor has set a fixed price for the work.
Budget with a reservation of incompleteness
This type of budget is used when the contractor cannot determine with certainty how much work or material will be needed to complete the work (even when exercising due care). The contractor may ask for a price increase if extra work becomes necessary that they could not have foreseen when the contract was concluded. If the new price is more than 10% higher than the original price and the client does not agree, the client may withdraw from the contract. Of course, the client must still pay a proportionate part of the price that corresponds to the extent of the work partly completed according to the budget. If the price increase is less than 10% and the client does not agree, a court will decide on the increase at the request of the party filing the claim.
Budget with a reservation of non-binding nature
This is used mainly when the final price cannot be determined because of fluctuating material prices. In this case, the contractor may ask for the price to be increased by the amount by which the reasonably incurred costs included in the budget have unavoidably risen. In case the client disagrees, a court sets the price. If the contractor increases the price by more than 10%, the client may also withdraw from the contract.
The right to payment of the price arises only once the work is completed and properly handed over. The parties may agree on advance payments.
Defects in the work
The Civil Code states that a work is carried out when it is completed and handed over. A completed work means that it functions and is ready to serve its purpose.
The law also states that a work is defective if it does not comply with the contract. The client must take over the work even if it has defects. In this case, however, they can take it over with a reservation. If a defect is obvious, the client must point it out when taking over the work, because otherwise the contractor may object that the client did not raise their objections in time (for example, if a turnkey house is missing interior doors).
For hidden defects, the client must notify the contractor without undue delay after discovering them or after they should have discovered them. However, they can report these defects no later than 2 years after the work was handed over.
The client then has rights arising from defective performance, to which the provisions on purchase apply accordingly. The client is therefore entitled to have the work repaired or to a discount on the price. In the case of more serious defects, they are entitled not only to the repair or discount already mentioned, but also to a replacement work or to withdraw from the contract. You can find out more about this in our article on complaints about goods.
Deadline
When concluding a contract for work, we strongly recommend also stating the deadline by which the contractor must complete the work and hand it over to the client. The work may also be completed in several stages (usually for buildings), and this also needs to be taken into account.
Place of performance
The deadline is also linked to the place of performance. It is not always necessary to specify the place of performance, but it is useful mainly in the case of buildings or other activities.
Intellectual property in the work
If the work is the result of the contractor’s creative activity (a painting, graphic design and so on), it will be the contractor’s intellectual property, and this also needs to be addressed in the contract.
If you need to conclude a contract for work with someone, we strongly recommend contacting a lawyer who understands the subject (especially for more expensive works). But if you do not want to do so for any reason, you can find a downloadable contract for work template here, which you can use for your own purposes.