Rights and obligations arising under contract law, including late payment interests

Contract law differences between B2B and B2C sales

Contract law distinguishes between civil-law, commercial (so called B2B – Business to Business) and consumer (so called B2C – Business to Consumer) contract.
A commercial contract is a contract concluded between traders in the exercise of an activity which forms the subject-matter of the business of at least one of them or they are related in the pursuit of those activities, whereas a consumer sales contract is a contract concluded between a natural person, as a purchaser, outside their economic or professional activity and a natural or legal person acting as a seller in the course of their economic or professional activity.
Both these types of contract are governed by the general provisions of contract law (which apply to all civil-law contracts), as well as special provisions that apply only to commercial and consumer contracts. Whereas commercial contracts are characterised by a requirement for increased diligence on the part of traders when carrying out their activities, which results in stricter rules than other contracts, consumer contracts are characterised by a weaker position of the consumer vis-à-vis the trader, resulting in lighter rules for consumers.
With regard to a contract of sale under general contract law (the Civil Obligations Act), the following specific provisions relate only to commercial and consumer contracts:
  • in commercial contracts, short deadlines in relation to civil or consumer contracts should be taken into account:
  • the seller is not liable for defects that appear after the expiration of two years from the delivery of the item (in the case of civil and consumer contracts) and in the case of commercial contracts this period is six months;
  • in terms of the sale of second-hand goods, the parties may agree a period of one year as a period of liability for material defects (in the case of civil and consumer contracts) and a shorter period may be agreed in the case of commercial contracts;
  • where the defect was known to the seller or could not be unknown to him/her, the buyer does not lose the right to invoke a defect when the buyer has failed to fulfil the obligation to inspect the goods without delay and within a certain period of time, even if the defect only became apparent after two years (in the case of civil and consumer contracts) or six months (in the case of commercial contracts) after the goods were handed over;
  • where the price in the commercial contract of sale is not fixed or determinable on the basis of the information contained in the contract, the buyer shall pay the price normally charged by the seller at the time of the conclusion of the contract and where there is no such price, he/she pays a reasonable price equivalent to the current price at the time of conclusion of the contract; where the price for other types of (civil, consumer) contract is not fixed or determinable, the contract has no legal effect;
  • where there are material defects in the goods, the buyer in the commercial contract of sale shall inspect the goods received or present it for inspection and shall inform the seller without delay of any apparent defects under threat of loss of the right in respect of material defects, and for hidden defects (those shown after receipt of the goods and which could not have been revealed by a normal examination of the goods), he/she shall inform the seller thereof without delay, while the consumer, as the buyer, is not obliged to inspect the item or to give it for inspection, but shall inform the seller of the defect within two months of the day on which he/she discovered the defect;
  • when notifying a defect to the seller, the buyer in the commercial contract of sale is required to describe the defect and invite the seller to examine it, whereas in relation to other (civil, consumer) contracts, the buyer is not bound by that obligation;
  • liability for material defects may be limited or excluded by the commercial and civil-law sales contract, but such a contractual term will be null and void if the defect was known to the seller and he/she did not inform the buyer about it, and also where the seller imposed that term using his monopoly position, whereas in consumer sales contracts it is not permitted to limit or exclude liability of the seller for material defects (such contract terms are null and void);
  • where, in a commercial contract, the seller has given the buyer a quantity greater than the agreed quantity in a commercial contract, and the buyer does not declare the excess to be deducted within a reasonable period, he/she shall be deemed to have also received that excess and shall be liable to pay it at the same price.

Should sellers offer remedies and, if so, what type of remedies?

In the case of lack of conformity of the goods with the contract, the seller shall be liable in accordance with the provisions of the legal guarantee (liability for material defects) and commercial guarantee (guarantee of correctness of the goods sold (guarantee)).
The Act provides that where there is a material defect, the trader shall provide the consumer with:
  • remedying the defect free of charge or providing other items without defect
  • price reduction
  • termination of the contract (subject to the conditions laid down by law) except for minor defects
  • compensation
provided that the consumer has informed him/her of the defect within two months of discovery of the defect, and at the latest within two years of the delivery of the goods. In the first place, the consumer may require the item to be repaired, the item to be replaced or the price reduced. In addition to those rights, he/she shall have the right to reparation. The consumer has the right to terminate the contract only if he/she has previously given the seller a subsequent reasonable period for execution of the contract (to repair or replace the item). If the seller fails to fulfil the contractual obligations within a subsequent reasonable period of time, the contract is terminated by operation of law, but the consumer may maintain it if he/she declares without delay to the seller that it shall remain in force (the same rule applies in the case of a contract with a lack of obligation for which performance within a specified period is an essential component of the contract). It is only by way of exception that the consumer may terminate the contract without giving the seller a subsequent period for fulfilling the obligations if he/she has been informed by the seller, after notification of the defects, that he/she will not be able to fulfil the contractual obligations or if it is evident from the circumstances of the case that the seller will not be able to fulfil the contractual obligations even within the subsequent time limit and where, as a result of the seller’s delay, the consumer is unable to achieve the purpose for which he/she concluded the contract.
Where the seller gives the consumer a commercial guarantee, the consumer shall, in the event of a defect in the item, be entitled to:
  • repair of the item within a reasonable period of time
  • replacement of the item if the item is not repaired within a reasonable period of time
  • right to compensation for damage suffered as a result of the deprivation of use of the item from the moment the repair or replacement is sought to its performance
  • termination of the contract or price reduction if the seller does not repair or replace the item within a reasonable period of time
  • right to compensation
if the defect is shown during the warranty period, to be determined by the seller.

Categorisation of contracts for the supply of digital content, liability for the lack of conformity of the digital content with the contract and consumer’s rights

There are no specific provisions in national law governing the contract for the supply of digital content and the seller’s liability for the lack of conformity of the digital content with the contract and the consumer’s rights.
Given that the transposition deadline for Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services has not yet expired and the Directive has not been implemented in national law, the conditions on the seller’s liability applicable to all contracts for pecuniary interest apply to the supply of digital content.

Late payments

Under general mandatory law (the Civil Obligations Act), a debtor who is late in fulfilling a pecuniary obligation is liable, in addition to the principal, for late payment interest. The debtor is considered to be late with payment when he/she fails to comply meet the payment deadline. If no time limit is fixed, the debtor is late when he/she is called upon by the creditor to fulfil the obligation, either orally or in writing, by an out-of-court letter of formal notice or by the initiation of any procedure aimed at achieving the performance of the obligation.
Under general mandatory law, the rate of legal default interest on commercial contracts and contracts between a trader and a person governed by public law is determined, for each half-year, by increasing by five percentage points the average interest rate on the outstanding amounts of loans granted over a period of more than one year to non-financial companies calculated for the reference period preceding the current half-year and, in other relationships, by three percentage points.
The average interest rate for the reference period is set by the Croatian National Bank and must be published in the Official Gazette of the Republic of Croatia on each 1 January and 1 July.
The creditor shall be entitled to default interest whether or not he/she has suffered any damage as a result of the debtor’s delay. If the damage suffered by the creditor as a result of the debtor’s delay is greater than the amount which he/she would have received by way of default interest, the creditor shall be entitled to claim the difference until full compensation.