Czech Supreme Court: contractual penalties in consumer contracts cannot be moderated

In a recent judgment No. 33 Cdo 3502/2024 dated 27 January 2026, the Czech Supreme Court has confirmed that if a contractual penalty clause in a consumer contract is unfair, the penalty cannot be moderated; the clause is to be disregarded entirely. This ruling has practical implications for businesses using contractual penalties in B2C relationships.

Legal development in a nutshell

The Czech Supreme Court has for the first time confirmed a conclusion previously derived by legal doctrine with reference to the judgment of the Court of Justice of the EU in Case C-618/10 Banco Español de Crédito of 14 June 2012: if a contractual penalty is disproportionate, resp. the contractual penalty clause, contrary to the requirement of good faith, creates a significant imbalance in the parties’ rights and obligations to the detriment of the consumer, it is considered an unfair term under Section 1813(1) of the Czech Civil Code. An unfair term is to be disregarded pursuant to Section 1815 of the Czech Civil Code and therefore has no legal effect. Courts thus cannot moderate a disproportionate contractual penalty in consumer contracts under Section 2051 of the Czech Civil Code.

If a court concludes that a contractual penalty clause is unfair, it will disregard it in its entirety.

Practical implications

Businesses using contractual penalties in consumer contracts should review whether their clauses could be considered unfair. When assessing whether a clause is unfair, courts consider in particular:

• Overall position of the consumer: Courts assess the clause in the context of the contract as a whole and the circumstances of its conclusion. The key question is whether, compared to the legal position without such a clause, the clause creates a significant imbalance in the parties’ rights and obligations to the detriment of the consumer, contrary to the requirement of good faith. Part of this assessment is also whether the contract penalises only breaches by the consumer or also breaches by the business.
• Proportionality of the penalty: The amount of the contractual penalty is assessed in relation to the nature and significance of the obligation it secures, and the function it is intended to fulfil in the contractual relationship. Courts also consider any cumulation with other sanctions.
• Transparency of the clause: The clause must be drafted clearly, precisely and intelligibly so that the consumer can recognise when and in what amount the obligation to pay the contractual penalty arises.

If the consumer has already paid the contractual penalty and a court subsequently finds that the clause was unfair, the consumer may claim restitution of the amount paid as unjust enrichment.

Conclusion

The Czech Supreme Court’s judgment has confirmed the previously derived interpretation that a disproportionate contractual penalty in consumer contracts cannot be moderated. Businesses using contractual penalties in consumer contracts should therefore review their existing contractual documentation and ensure that the relevant clauses cannot be considered unfair.

If you are interested in the topic of consumer contracts in the Czech Republic and want to learn more, please contact your CMS client partner or our expert Jan Ježek.