Limitations and exclusions of liability in business to business contracts in Hungary

As a general rule, pursuant to Section 6:59 of Act V of 2013 on the Civil Code (“Hungarian Civil Code”), in B2B contracts the parties are free to determine the content of their contract, and they may, by mutual agreement, exclude or limit liability unless such deviation is prohibited by law. 

However, in case the exclusion or limitation of liability is contained in a party’s standard terms and conditions, it shall become part of the contract only if the contracting party had the opportunity to become acquainted with its content and agreed to it. The party applying the exclusion or limitation of liability in general terms and conditions must specifically inform the other of any standard contract terms that significantly deviate from the law, usual practice, or previously agreed terms, unless they align with an established practice between the parties (Section 6:78 of the Hungarian Civil Code).

Pursuant to Section 6:152 of the Hungarian Civil Code, any contractual clause limiting or excluding liability for intentional breach of contract, or for breaches causing harm to human life, physical integrity, or health, shall be null and void. This Section serves as one of the fundamental benchmarks for assessing the permissibility of any contractual limitation of liability.

Furthermore, under Section 6:102 of the Hungarian Civil Code, general terms and conditions that limit or exclude liability and that one-sidedly and unjustifiably disadvantage the other party in violation of good faith may be challenged as an unfair general term in B2B contracts.

Exclusions of liability for consequential, indirect or special losses are permissible to the extent they do not contradict the mandatory rules set out in question 2 above.

Similarly, as set out in Question 3 above, exclusions relating to loss of profit, revenue, data, goodwill or anticipated savings are valid only within the framework of the mandatory rules set out in question 2 above.

As the most classic and perhaps most common method of limiting liability is capping the amount of damages, financial caps on liability are permitted in accordance with the general rules and therefore commonly upheld by courts.

Section 6:8 of the Hungarian Civil Code permits the parties to waive certain of their rights or remedies contractually. An exclusive remedy clause constitutes such waiver of rights regarding the other remedies not included in the clause. These clauses are enforceable if they are made expressly and the waiver is unambiguous and explicit. Such provisions shall not be subject to a broad interpretation.

Under Hungarian law, courts do not apply “blue-pencil” rules in the common law sense, i.e. they are not generally entitled to rewrite or reformulate a contractual clause in order to make it enforceable. However, Hungarian law recognises partial invalidity and severability.

Pursuant to Section 6:114 (1) of the Hungarian Civil Code, where the ground of invalidity affects only a separable part of a contract, the consequences of invalidity apply only to that part, unless it is presumed that the parties would not have entered into the contract without the invalid part. Accordingly, if a limitation or exclusion of liability is invalid only in respect of certain types of breach or damage, the invalidity will generally affect only that prohibited part, while the remaining, lawful part may continue to apply.

In addition, Section 6:110 of the Hungarian Civil Code allows the court, in certain circumstances, to declare an otherwise invalid contract or contractual term valid by eliminating the ground of invalidity or by limiting the clause to the extent permitted by law. This does not amount to a general power to rewrite the parties’ agreement, but it may allow the court to preserve the clause within the boundaries allowed by mandatory law.

Therefore, a clause which purports to exclude or limit liability in breach of Section 6:152 of the Hungarian Civil Code would be unenforceable only to the extent that it covers liability which cannot lawfully be excluded or limited, such as liability for intentional breach or for damage caused to human life, physical integrity or health. The remainder of the limitation or exclusion may remain enforceable if it is separable and capable of standing on its own.

Pursuant Section 6:22 (3)-(4) of the Hungarian Civil Code, parties are permitted to shorten or extend statutory limitation periods only by written agreement. However, totally excluding the limitation period is not allowed, noting that setting an unrealistically long limitation period is also considered exclusion of the limitation period. 

Pursuant to sections 6:95 and 6:96 of the Hungarian Civil Code, contractual limitation or exclusion of liability may be considered null and void in case it is contrary to good morals or was concluded by circumventing the law. 

According to the case law, a contractual term is considered contrary to good morals if, although not prohibited by law, its intended purpose, the nature of the obligation undertaken, the consideration offered in return, or its subject matter clearly violates generally accepted moral norms or customs, and is therefore regarded by society as manifestly unfair and unacceptable.

In cases where the contract is governed by Hungarian law, but the supply of goods/services are performed abroad, generally the Hungarian law will apply. However, if all elements relevant to the contract are related to another country, the choice of Hungarian law shall not prejudice the application of mandatory provisions of the law of that other country (Section 50 (4) and 51 of Act on private international law and paragraph (3) of Article 3 of Rome I Regulation).

Therefore, if all elements relevant to the contract are related to another country other than Hungary, the limitation and exclusion of liability clauses remain subject to mandatory legal provision of that country, which may override the governing Hungarian law.

In cases where the contract is governed by a foreign law, but the supply of goods/services is performed in Hungary, courts will apply the governing foreign law, however, the choice of the parties shall not prejudice the application of mandatory provisions of the Hungarian law (Section 50 (4) and 51 of Act on private international law and paragraph (3) of Article 3 of Rome I Regulation).

As a result, any contractual limitation or exclusion of liability for intentional breach of contract, or for breaches causing harm to human life, physical integrity, or health, may be considered null and void, even if such limitation or exclusion is permitted under the governing foreign law.