Publication date: December 10, 2024
Civil law is a set of norms concerning private law relationships that permeate the economic life of every society. Civil law consists of, on the one hand, absolutely binding norms that apply regardless of the situation, which means that there is no possibility of legally circumventing them, and on the other hand, relatively binding norms, the application of which can be excluded by means of an appropriate contractual clause or provision of a model contract. In addition, there are certain general principles of civil law that give meaning to individual norms.
What happens when these principles conflict? Resolving such a case requires a complex analysis. Recently, such an analysis was carried out by our lawyers’ team in the context of the cap-on liability clause known to Common Law legal systems, which limits ex contractu liability for damages to the amount accepted by the parties to the contract. Is it possible to translate it into a Polish law contract? How does it relate to the principle of freedom of contract and the principles of liability for damages? What does contractual liability look like in Polish law and how far can the parties to the contract go in modifying it? In this entry, we share with you our answer to this question based on the provisions of the Act of 23 April 1964, the Civil Code (Journal of Laws of 2024, item 1061, as amended; hereinafter referred to as the Civil Code or CC) and other legal acts.
Liability for damages in Polish law originates either from tort, i.e. from a tort understood as an act causing damage, or from ex contractu, i.e. from an act constituting a breach of contract and causing damage to the other party. The basic provision concerning contractual liability is art. 471 of the Civil Code. However, it does not contain a comprehensive regulation of the premises of contractual liability and somehow refers to the general provision on liability for damages from art. 415 of the Civil Code. Therefore, when reconstructing the norm concerning contractual liability in the Polish Civil Code, both provisions should be considered together.
The conditions for contractual liability in Polish law are:
– the occurrence of damage (legal basis: art. 471 of the Civil Code in connection with art. 415 of the Civil Code) àexamined according to the differential theory – i.e. as the difference between the property of the injured party at the time of the event causing the damage and the property of the injured party after the event. It should be remembered that in Polish law, damage consists, pursuant to art. 361 § 2 of the Civil Code, of:
– damnum emergens à, i.e. actual damage being a reduction of the injured party’s assets existing at the time of the event causing the damage
– lucrum cessans à, i.e. lost profits, and therefore highly probable profits that the injured party will not obtain as a result of the event causing the damage (e.g. damage to a taxi preventing it from participating in road traffic will result in the taxi driver losing profits that he could have obtained if the taxi had not had to be taken to repair for a few days)
– the event causing the damage is the failure to perform or improper performance of an obligation for which the debtor is liable (legal basis: art. 471 of the Civil Code) àthis is a necessary condition for speaking of contractual liability in Polish law. Otherwise, one can speak of tortious liability at most;
– adequate causal relationship between the event causing the damage and the occurrence of the damage (legal basis: Article 361 § 1 of the Civil Code)àThe adequate causal relationship is examined on the basis of two successive thought experiments:
– test of the condition sine qua non àverifying whether the event was a necessary condition for the occurrence of damage
– normality of consequences test àto verify whether the damage was a normal consequence of the event – and therefore foreseeable for the perpetrator of the damage
– liability of the perpetrator of the damage (legal basis: art. 471 of the Civil Code) àimportantly, it may be liability based on fault, but also in cases provided for in the Civil Code, based on the principle of risk or equity. The key is to assign this liability to the perpetrator of the damage.
The above scheme of examining contractual liability in Polish civil law was developed by outstanding representatives of civil law studies and constitutes the canon of civil law science[1].
Importantly, contractual liability by definition concerns liability for damage caused to the other party to the contract through its breach. In special cases, contractual liability may also cover acts causing damage to the other party even before the contract is concluded, e.g. conducting negotiations in bad faith contrary to art. 72 § 2 of the Civil Code (and therefore without the intention of actually concluding the contract, misleading the other party to the negotiations) despite a pre-contractual agreement to conduct negotiations. In the absence of such a pre-contractual agreement, it is assumed, however, that conducting negotiations in bad faith gives rise to tortious liability[2].
In addition, it must be borne in mind that contractual liability applies not only to contracts themselves, but also to obligations based on grounds other than tort, such as an obligation arising from unjust enrichment. Therefore, the name “contractual liability”, although traditionally accepted, does not fully reflect the content of Article 471 of the Civil Code.[3]
Finally, it is worth noting that the doctrine indicates that there is a possibility of a situation in which one event causing damage will be simultaneously connected with contractual and tortious liability. In such a case, there will be a competition of claims on the side of the injured party, who will be entitled to choose the claim to raise in court. An exception to this rule is Article 443 of the Civil Code, which allows for the contractual establishment of priority of contractual liability or exclusion of tortious liability (the latter only in cases permitted by law)[4].
A feature of contractual liability in Polish law is that, in accordance with the principle of freedom of contract expressed in Article 353 § 1 of the Civil Code, its scope may be subject to modifications in accordance with the will of the parties to the contract expressed in the appropriate provisions. This is confirmed by the content of Article 361 § 2 of the Civil Code, which explicitly allows for a contractual limitation of liability ex contractu. Article 361 § 2 is a provision of the iuris dispositivi nature. The parties may therefore, by way of an agreement, specify the scope of the damage subject to redress differently. They may also establish a method of calculating the value of this damage that differs from the one presented above. However, such provisions are subject to assessment from the point of view of Article 3531, and in relation to consumers – also according to Article 3851.[5]
This thesis is a good starting point for further considerations regarding the dispositivity of provisions concerning contractual liability. There are two important provisions of the Polish Civil Code, which set the limits for modifying contractual liability.
First of all, it is worth referring to Article 3851 of the Civil Code concerning consumer relations and prohibited contractual provisions understood as clauses not individually agreed upon with him (and therefore imposed by the stronger party to the consumer relationship, which is the entrepreneur) and shaping his rights and obligations in a manner contrary to good customs, grossly violating his interests. Importantly, Article 3853 of the Civil Code contains an open catalogue of sample contractual provisions considered prohibited in consumer contracts due to their contradiction with good customs. Such provisions, according to point 2) of this provision, are clauses that: “exclude or significantly limit liability towards the consumer for failure to perform or improper performance of an obligation”. Therefore, an exemplary contractual provision inspired by the cap-on liability clause known in Common Law legal systems, limiting the amount of compensation for the consumer to a predetermined amount, regardless of the amount of damage suffered by him, would be deemed an unfair contractual provision within the meaning of Article 3851 of the Civil Code. Therefore, such a provision would constitute an unfair modification of contractual liability and would be invalid.
The existence of specific consumer regulations does not mean, however, that in mutually professional relations, in which both parties to the contract are entrepreneurs, there are no restrictions on modifying the scope of contractual liability. The principle of freedom of contract contained in Article 3531 of the Civil Code, is not without restrictions. In the light of this provision, restrictions on freedom of contract are caused by:
– the nature of the relationship
– Act (statute) à, where “act” should be understood as any act present in the Polish legal system, not only the Civil Code
– principles of social coexistence.
Each of these limitations will be discussed with a specific example.
The nature of a civil law relationship would be opposed by a contractual provision excluding liability ex contractu for damage caused by defective performance of construction works based on a construction contract. The essence of a construction contract is the performance of specific construction works, and their defective performance meets the provision of the norm of art. 471 of the Civil Code.
As for the limitations of freedom of contract resulting from the act, on the basis of the Civil Code, one can, for example, cite Article 473 § 2 of the Civil Code, according to which it is not possible to exclude contractual liability for damage that the debtor may cause intentionally. The cited provision is of an absolutely binding nature, which results from its content. Therefore, each contractual clause providing for such an exclusion violates the provision of the act and consequently does not fall within the freedom of contract provided for by the Civil Code.
The aforementioned cap-on liability clause may also raise doubts as to its compliance with the Civil Code. From the perspective of Article 473 § 2 of the Civil Code, the limits of the principle of freedom of contract will be exceeded by a provision limiting liability for damage that the debtor may cause intentionally to a specified amount – according to this provision, such liability cannot be subject to any limitations. Such a clause will be burdened with a legal defect.
Another example may be the regulation of the contract of carriage concerning the carriage of goods. According to art. 788 § 1 of the Civil Code, only in the event of the carrier’s wilful misconduct or gross negligence may compensation exceed the value of the shipment. Therefore, any provision that extends the carrier’s liability, e.g. by allowing compensation in an amount higher than the value of the shipment in the event of unintentional misconduct, will also constitute exceeding the limits of freedom of contract, resulting in the invalidity of such a clause.
In relation to another act, it is worth referring to the issue of the carriage of goods, which has already been discussed. A transport contract for the carriage of goods performed by entrepreneurs acting as carriers is governed not only by the provisions of the Civil Code, but also by the Act of 15 November 1984 – Transport Law (consolidated text: Journal of Laws of 2024, item 1262; hereinafter referred to as the Transport Law). Importantly, the provisions of the Transport Law are not of a dispositive nature, but are absolutely binding. It is assumed that the provisions regulating the principles of liability (as well as the provisions on determining damage and pursuing claims and the amount of compensation) are absolutely binding. Although the provisions of the commented act do not state this directly, this view is based on the purpose of the regulation, which is the proper distribution of burdens and risks related to transport between the participants of the transport process (…) Hence, the provisions of contracts or regulations issued by carriers, in which the limits of liability are specified in a manner different from the provisions of the act, should be considered invalid[6]. Therefore, a contractual provision in which the principle of determining the amount of compensation is based on the maximum amount provided for by the cap-on liability clause, and thus is contrary to the principles of determining the amount of compensation under Article 80 of the Transport Law, will be invalid.
The principles of social coexistence may, in turn, be contradicted by a contractual provision limiting liability for damages to a specified amount (i.e. the cap-on liability clause discussed above). It is worth bearing in mind that events and their effects in the form of various types of damages are diverse. Assuming that liability for damages is limited to specific amount, there may be cases in which compensation will cover 100% of the damage or 10% of the damage. Such an assumption seems to be completely contrary to the idea of compensation and its compensatory function – after all, in a case where compensation covers 10% of the damage, the real compensation is negligible, and there will be no “settling of scores” between the injured party and the perpetrator of the damage. Some may consider this to be contrary to the principles of social coexistence, including the common understanding of compensation as a benefit aimed at eliminating the damage caused by the perpetrator in its entirety.
As can be seen, while the Polish legislator allows for contractual modification of the scope of liability for damages ex contractu, such modification cannot go beyond the strictly established legal framework. Otherwise, the clause containing such modification will be invalid under Article 58 § 1 of the Civil Code in connection with Article 58 § 3 of the Civil Code.
4. Summary
Civil law consists of a number of standards defining the “rules of the game” in business transactions and its general principles. Much depends on the individual agreements of the parties, especially in mutually professional relations, also known as B2B. However, this does not mean that everything is possible – there are specific legal frameworks, the exceeding of which may result in the invalidity of the provisions of the contract. This is particularly visible in the context of contractual limitations of liability for damages ex contractu, which, while permissible under Polish law, cannot be contrary to the nature of the civil law relationship, the act and the principles of social coexistence, which results from art. 3531 of the Civil Code. Furthermore, in the context of consumer relations, art. 3851 of the Civil Code on prohibited contractual provisions and their open catalogue contained in art. 3853 of the Civil Code should be taken into account, whose points 1) and 2) refer precisely to prohibited limitations of the entrepreneur’s liability for damages towards the consumer.
Therefore, each clause limiting contractual liability placed in a Polish law contract should be thoroughly examined by. It is worth remembering that there are many different legal orders in the world, and transposing solutions known to one of them (such as the cap-on liability clause known from Common Law) to others may turn out to be invalid or ineffective in the Polish jurisdiction.
Bibliography:
a) legal acts:
– Act of 23 April 1964 – Civil Code (consolidated text: Journal of Laws of 2024, item 1061, as amended);
– Act of 15 November 1984 – Transport Law (consolidated text: Journal of Laws of 2024, item 1262).
b) legal literature:
– D. Ambrożuk, D. Dąbrowski, K. Wesołowski, Transport Law. Commentary, 2nd ed., LEX/el. 2019;
– ed. M. Balwicka-Szczyrba, A. Sylwestrzak, Civil Code. Commentary, 2nd edition, Warsaw 2024;
– ed. J. Ciszewski, P. Nazaruk, Civil Code. Commentary, Warsaw 2019;
– ed. Z. Radwański, A. Olejniczak, Civil Law – General Part. Private Law System. Volume 2. 3rd Edition, Warsaw 2019.
[1]A. Lutkiewicz-Rucińska [in:] Civil Code. Commentary, 2nd edition, ed. M. Balwicka-Szczyrba, A. Sylwestrzak, Warsaw 2024, article 471.
[2]ed. Z. Radwański, A. Olejniczak, Civil Law – General Part. Private Law System. Volume 2. 3rd ed., Warsaw 2019, no. 80.
[3]A. Lutkiewicz-Rucińska [in:] Civil Code. Commentary, 2nd edition, ed. M. Balwicka-Szczyrba, A. Sylwestrzak, Warsaw 2024, article 471.
[4]G. Karaszewski [in:] Civil Code. Commentary, ed. J. Ciszewski, P. Nazaruk, Warsaw 2019, article 443.
[5]G. Karaszewski [in:] Civil Code. Commentary, ed. J. Ciszewski, P. Nazaruk, Warsaw 2019, article 361.
[6]K. Wesołowski [in:] D. Ambrożuk, D. Dąbrowski, K. Wesołowski, Transport Law. Commentary, 2nd ed., LEX/el. 2019, article 65.