Standard Terms in Contracts: What Do Businesses Often Get Wrong?

Standard Terms 

Contracts are concluded quickly and routinely on a daily basis, often in a standard format, without thorough discussion of all terms. Many of them contain standard terms in small print, which may turn out to be wholly or partially void. 

What Are Standard Terms? 

Under the law, standard terms are contractual provisions that have been pre-formulated for repeated use and have not been individually negotiated by the parties. Even between business clients, a standard clause may qualify as a standard term, even if the contract as a whole was discussed or “negotiated.” 

In business-to-business relations, there is a presumption that a standard term declared void has unreasonably disadvantaged the other party. The user of the term may rebut this presumption only by proving that such a clause is customary in the relevant field. 

Limitations and Invalidity of Standard Terms 

Although the use of standard terms in contracts is common, the legislator and the Supreme Court have set clear boundaries to prevent unfair treatment of the weaker party. 

The Supreme Court has emphasized that limitations of liability must comply with the law and be precisely drafted. General and vague clauses — for example, giving the impression that one party “is not liable for anything” — are not valid unless they include the statutory exceptions: liability cannot be limited for damage caused intentionally or by gross negligence, nor in cases of death or personal injury. Such exclusions are not permitted even in economic or professional activities. 

The Supreme Court has also held that excessively broad exclusions of claims may be unreasonably detrimental because they restrict the other party’s ability to protect their rights. If a standard term makes the exercise of an essential right disproportionately difficult or calls into question the achievement of the contract’s purpose, it must be considered void. 

Importantly, the court reviews the validity of standard terms on its own initiative. Each part of a contractual clause is assessed separately, because the same clause may contain several independent limitations, some of which may comply with the law while others do not. 

What Limitations Are Permitted? 

Reasonable limitations of liability are allowed, for example, limiting liability to the amount of the contract’s annual fee. However, the law does not permit a complete exclusion of liability. Nor is a declaratory statement such as “the company’s liability is limited” sufficient. A limitation is valid only if it explicitly includes the statutory exceptions concerning intent, gross negligence, and damage resulting in death or personal injury. 

According to the Supreme Court’s case law, the risk of vague or unclear standard terms lies with the party who drafted them. A standard term is assessed from the perspective of how a typical, reasonable contracting party in a similar situation would understand it. If the meaning remains unclear or ambiguous, it is interpreted against the user of the term, because they formulated the clause and are responsible for its clarity. 

The Supreme Court’s approach sends a clear message to businesses: standard terms must be drafted carefully and precisely. Limitations of liability used in commercial contracts must not be declaratory or vague, they must be presented clearly, understandably, and in a way that allows the other party to genuinely review them before the contract is concluded. 

At the same time, a business client does not have to accept terms that unreasonably disadvantage them. Even if they have signed the contract, the court will independently review the validity of standard terms based on the law.