The determination of the applicable law for commercial contracts in Croatia is primarily governed by Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (the “Rome I Regulation”). Upon joining the EU on 1 July 2013, Croatia became bound by this regulation, and it applies to contracts concluded after that date.

The Croatian Private International Law Act (the “PIL Act”), which entered into force on 29 January 2019, directly reinforces the central role of the Rome I Regulation in determining the applicable law for contractual obligations in Croatia, establishing a comprehensive system both for contracts falling within the Rome I Regulation’s scope and for those that are excluded.

The general rules for the choice of the applicable law for commercial contracts in Croatia are guided by the principle of freedom of choice and the principle of protection of public order. In essence, the parties are allowed to freely choose the applicable law – subject, however, to compliance with the mandatory norms and public morality. If the parties do not choose the applicable law, private international law rules apply, generally leading to application of Croatian law if the contract has the closest connection to Croatia.

The general rule for the form of a commercial contract in Croatia is that the contract may be concluded in any form, unless a law specifically requires otherwise. Contracts may be concluded in oral, implied, written, electronic or notarial form, depending on the parties’ agreement and the nature of the transaction.

If the law requires a contract to be concluded in a particular form, this requirement also applies to all subsequent amendments and supplements to the contract. However, oral amendments concerning minor points not addressed in the contract are valid if they do not contradict the purpose of the prescribed form, and oral agreements that reduce or ease the obligations of either party are valid if the special form was prescribed only in the interest of the parties.

In general, written and notarial forms are mandatory only for certain types of contracts prescribed by law. In practice, although many contracts can be concluded without strict formalities, written contracts are the standard practice in commercial law as they provide a clear record of what was agreed upon (evidentiary purposes).

Local Legal Sources

The main legislation for commercial contracts in Croatia is the Civil Obligations Act (COA). The hierarchy of applicable sources for commercial contracts is as follows:

• the Constitution of the Republic of Croatia, mandatory legal norms and public morality;
• the contract itself (including standard terms, dealt with in greater detail in 3.3 Standard Terms and Conditions);
• practice established among traders;
• customs (specific usages and trade customs); and
• dispositive legal norms.

International Legal Sources

In terms of legal force, international treaties are above the local legislation. Therefore, in the context of cross-border sales transactions, the United Nations Convention on Contracts for the International Sale of Goods (CISG) serves as the predominant legal framework. Croatia became a party to the CISG on 8 October 1991 via succession.

Main Differences

Some of the main differences between the COA and the CISG include the following.

General offers

While the COA (Article 254) generally holds that a proposal containing all essential elements directed to the public (general offer) or the display of goods with a price constitutes a binding offer, the CISG (Article 14(2)) typically treats a proposal to an undetermined number of persons merely as an invitation to make an offer, unless explicitly indicated otherwise.

Irrevocability of an offer

Under the COA (Article 257), an offer is fundamentally considered irrevocable unless the offeror excludes this obligation. The CISG (Article 16) adopts the opposite approach, treating offers as generally revocable unless the offer states that it is irrevocable or the offeree reasonably relied on its irrevocability.

Hardship

If circumstances change significantly, the COA (Article 369) permits the affected party to seek judicial modification or termination of the contract. The CISG (Article 79) addresses this issue primarily by providing exoneration from liability for damage caused by the impediment, but it does not enable judicial modification of the contract terms.

Treatment of IP defects

The COA does not differentiate between various types of legal defects. In contrast, the CISG separates the regulation of legal defects based on industrial and other intellectual property rights (Article 42) from general legal defects (Article 41). The CISG’s general rule (Article 41) is broadly similar to the COA and is more favourable to the buyer, while the rule under Article 42 is more favourable to the seller.

Defect definition

According to the COA, the third party’s right must exist for the seller’s liability to arise. However, under the CISG (Article 41), a mere claim by a third party is sufficient for seller’s liability to arise.

Buyer’s knowledge

The buyer’s knowledge of the defect generally excludes seller liability under the COA (Article 402) and CISG (Article 42). In contrast, under the CISG (Article 41), mere buyer knowledge is insufficient and the buyer must give explicit consent to accept the goods burdened by the legal defect in order for the seller’s responsibility to be excluded.

Croatian law contains mandatory rules both in general and for specific contracts.

For example, some of the mandatory rules under the COA are:

• written contract form – guarantor’s agreement, construction agreement, real property rental agreement, etc;
• prescription (prekluzija) – for the inspection of bought goods, subjective deadline for notification on defects in construction agreements, etc;
• mandatory elements of sale contracts with payments in instalments;
• commercial agency contracts – minimum notice period in the case of termination, the right to a special fee;
• forwarding agent’s liability for other persons; and
• specific rules applicable to insurance contracts.

In addition, the Croatian Consumer Act (Article 45), applicable to business-to-consumer (B2C) contracts, contains mandatory consumer protection provisions and stipulates that a consumer cannot waive or limit the rights afforded to them by law, and that any contractual clauses that are less favourable to the consumer than those required by the law are automatically null and void.

Over the past three years, EU court decisions and legal reforms in Croatia have impacted commercial contract law.

Court Decisions

A notable development is the 2024 Hann Invest ruling by the Court of Justice of the European Union (CJEU) (C 554/21, C 622/21, C 727/21), which held that the Croatian mechanisms for ensuring uniform judicial practice via special judges (sudac evidentičar) who monitor case law coherence of that court, as well as binding legal positions adopted in judicial department plenums, are incompatible with EU law (specifically Article 19, Treaty on European Union) as they undermine judicial independence by allowing extra procedural, non-transparent binding positions even in cases already deliberated. This will have major implications for how Croatian courts handle precedents and internal judicial guidance, especially in commercial contract litigation, where uniformity of interpretation is critical.

Legal Developments

In the last 12 months, a clear legal trend has emerged around digitalisation of judicial and registry processes, affecting how commercial contracts are formed, documented, enforced and registered. Notable reforms include the “paperless commercial courts” pilot project aimed at making commercial courts fully digital in workflow for judges and court staff. Likewise, the Court Register has been modernised so that entrepreneurs and notaries can file changes fully online via an integrated platform, cutting court fees. Also, digital communication systems are now broadly in use – eg, e filing and e case management, court e-bulletin boards, e-land registries, e-enforcements.

Another notable development is the adoption of the euro as of 1 January 2023. The Euro Adoption Act ensured continuity of contracts by stating that contracts, laws, court decisions and other legal instruments referring to the kuna now legally refer to its euro equivalent, thereby preserving contractual stability and avoiding mass renegotiations.

The determination of applicable law for commercial contracts in Croatia is fundamentally governed by the Rome I Regulation. The Croatian legislature formalised the application of the Rome I Regulation in the PIL Act Article 25(1), and actually extended its reach in Article 25(2), which mandates that the law applicable to contractual obligations that are excluded from the field of application of the Rome I Regulation (and not determined by another law or international treaty) are determined according to the provisions of the Rome I Regulation that relate to those obligations.

Freedom of Choice

What can be chosen

Parties are free to choose the law of any state. However, this choice must relate to the legal order of a state. The Regulation does not provide conflict-of-law effect to the selection of non-state bodies of law (eg, lex mercatoria), although parties are free to incorporate such rules into the content of their contract. If a state is territorially complex (like the USA or UK), the choice must designate the law of a specific territorial unit (eg, the law of New York or the law of England and Wales).

How to choose

The choice of law must be either explicit or clearly demonstrated by the terms of the contract or the circumstances of the case (eg, a clause stipulating the exclusive jurisdiction of a court of a certain state, or the use of contract terms or legal terminology characteristic of a specific legal system).

Scope of application

Parties are permitted to choose the applicable law for the entire contract or only a part of it (known as dépeçage), and they may modify their choice at any time.

Limitations

Purely domestic contracts

If a contract is linked only to the legal system of one state (eg, exclusively Croatia), the choice of a foreign law cannot override the application of the mandatory rules of that state’s law.

Intra-EU contracts

If all relevant elements are located within one or more EU member states but are not connected to a third country, the choice of a non-member state law cannot exclude the mandatory provisions of EU law.

Applicable Law If No Law Is Chosen

If the parties have not chosen the applicable law, Croatian courts applying the Rome I Regulation will determine the applicable law primarily based on the nature of the contract as per Article 4(1). For instance, in the case of sale of goods, the law of the country where the seller has habitual residence would apply, while in the case of provision of services it would be the law of the country where the service provider has habitual residence, etc. If the contract type is not specified under Article 4(1), the law of the country where the party performing the characteristic obligation has habitual residence applies. However, if it is clear from all the circumstances that the contract is more closely connected with another country, the law of that other country applies.

For contracts concluded before Croatia’s accession to the EU (prior to 1 July 2013), the law applicable in the absence of party choice would be determined primarily according to the older conflict-of-law rules found in the Act on Conflict of Laws with the Regulations of Other Countries in Certain Relations.

In the event of a dispute, the application of a foreign law chosen by the parties before Croatian courts is not absolute. Overriding mandatory rules (pravila neposredne primjene) take precedence over any other applicable law, including the law chosen by the parties.

Under Article 13 of the PIL Act, overriding mandatory rules are defined as provisions regarded as crucial for safeguarding Croatian public interests – such as its political, social or economic organisation – to such an extent that they are applicable to any situation falling within their scope, irrespective of the law otherwise applicable. Overriding mandatory rules can be found in both public and private law.

The prevailing standpoint in Croatian legal literature is that the courts must always apply the overriding mandatory rules of the lex fori. In practice, the court should disregard the existence of the international element and directly apply the relevant Croatian mandatory rule. Legal literature also finds that overriding mandatory rules of the lex causae (the law otherwise governing the contract) should likewise be applied, as they form an integral part of that legal system.

Legal scholars typically associate overriding mandatory rules with norms intended to safeguard Croatia’s fundamental public interests. Examples often cited include provisions of criminal law, labour law, tax law, rules on confiscation and expropriation of property, rules on real property acquisition, exchange rate legislation, etc. However, Croatian courts have not confirmed or rejected these interpretations, as there seem to be no published Croatian court decisions explicitly recognising a particular provision as an overriding mandatory rule. Instead, they often rely on the public policy (ordre public) exception, applying Croatian substantive law where foreign law would otherwise apply under private international law rules. This overlap between overriding mandatory rules and the public policy exception is not unique to the Croatian legal system.

One Domestic Party, One Foreign Party

If only one of the contract parties is from Croatia, a foreign jurisdiction can be chosen, as this situation clearly involves a cross-border element.

Choice of an EU member state court

The parties may agree on the courts of any EU member state to settle their disputes based on Article 25 of Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the “Brussels I bis Regulation”), provided certain conditions are met.

Choice of a third-state (non-EU) court

The Croatian PIL Act explicitly allows parties to agree on the jurisdiction of a court of a state that is not a member of the EU, unless the matter falls under the exclusive jurisdiction of a Croatian court or another EU member state court. In such a case, the rules of the Brussels I bis Regulation governing prorogation of jurisdiction (Section 7) are applied.

Where Parties Are Both Domestic

If both the contract parties are from Croatia, a foreign jurisdiction can be chosen – specifically, the court of another EU member state, based on recent CJEU interpretation of the Brussels I bis Regulation. Namely, the 2024 CJEU judgment (C-566/22, Inkreal) allows parties established in the same EU member state to agree on the jurisdiction of another member state’s court. This is true even if the contract itself has no other connection with that court. The CJEU’s rationale is that the mere existence of such an agreement conferring jurisdiction on a foreign EU court demonstrates the cross-border implications of the dispute. This effectively allows parties to “internationalise” a purely internal situation by their own will.

Arbitration Agreement and Seat

The ability of parties to agree on arbitration when one or both are from Croatia, and the subsequent effect of that agreement on local court proceedings, is governed by the Croatian Arbitration Act, which allows the parties to agree on arbitration provided the dispute relates to rights that they can freely dispose of.

The specific rules regarding where the arbitration can be seated depend on whether the dispute has a “domestic” or “international” feature, as defined by the Croatian Arbitration Act. A dispute is considered to be without an international feature if all parties are natural persons habitually resident in Croatia or legal persons established under Croatian law. On the other hand, a dispute has an international feature if at least one of the parties is a natural person habitually resident abroad or a legal person established under foreign law.

Purely domestic disputes

The parties must agree on a domestic arbitration (ie, seat in the territory of Croatia). Contracting arbitration outside Croatia in disputes that do not have an international feature is contrary to mandatory provisions, resulting in such an arbitration clause being null and void (as confirmed by the judgment of the High Commercial Court of Republic of Croatia, Pž-796/2022, as of 24 January 2023). If Croatian parties were to conduct arbitration abroad, the resulting award would be considered a foreign arbitral award. Croatian courts must refuse to recognise or enforce that award as, according to Croatian law, the subject matter would be considered non-arbitrable in a foreign forum.

Disputes with an international feature

The parties can agree on domestic or foreign arbitration. However, foreign arbitration is excluded if a special law prescribes that the dispute can only be resolved by a court in Croatia. This generally covers cases where exclusive international jurisdiction is prescribed for Croatian courts (eg, disputes concerning real property located in Croatia). Even in these cases of exclusive national court jurisdiction, domestic arbitration remains possible, provided the dispute relates to rights that the parties can freely dispose of.

Court Intervention

If parties validly agreed on arbitration, this agreement generally prevents them from successfully pursuing the dispute in a Croatian state court, thus respecting the arbitration agreement (analogous to the effect implied by Article II(3) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 – the “New York Convention”).

If a lawsuit concerning a dispute covered by an arbitration agreement is filed with a state court, the court must, upon the defendant’s objection, declare itself incompetent, annul the actions taken and dismiss the claim. The court will only proceed if it finds that the arbitration agreement is invalid, has ceased to be valid or cannot be fulfilled. This objection must be raised by the defendant no later than at the preliminary hearing, or during the main hearing when entering into discussion on the merits. The fact that a lawsuit was filed with a state court does not prevent the arbitration procedure from being initiated or continued, and the arbitral award may be rendered while the court proceedings are still under way.

Public Policy and Enforceability

Croatian courts will assess the arbitrability and public policy compatibility of an award, which reflects similar safeguards to those found in the New York Convention.

Recognition and enforcement of a foreign arbitral award will be refused if the court determines, among other grounds, that:

• the subject matter of the dispute is not arbitrable according to the laws of the Republic of Croatia; or
• the recognition or enforcement of the award would be contrary to the public policy of the Republic of Croatia.

A domestic arbitral award has the force of a final court judgment between the parties – thus, the court will order the enforcement, unless it finds grounds for annulment (Article 36(2) of the Croatian Arbitration Act). This falls into two categories:

• grounds requiring the challenging party to prove defects, such as an invalid arbitration agreement, incapacity, lack of proper notice, excess of mandate, or procedural/formal irregularities; or
• grounds that the court reviews ex officio, which are the same as in the case of foreign arbitral awards (ie, that the subject matter is non-arbitrable under Croatian law or that the award conflicts with the public policy of the Republic of Croatia).

The usual forms of contracts in Croatia are oral form (spoken words), conclusive actions (implicitly conveying the will to contract), written form and qualified form.

Under the COA, contracts are generally valid regardless of form. The requirement for a specific form can be established by law or by the parties’ agreement, while failure to meet this requirement generally results in the contract being null and void.

Formalism established by law is generally in written form – eg, real property rental agreement, guarantor contract, sale contract with instalment payments, construction agreement, licence contract, commercial agency contract, allotment contract, bank loan contracts, etc.

Formalism established by agreement is where the parties may agree that a specific form is a prerequisite for the contract’s existence and validity, particularly for transactions of greater value or long-term significance.

Written Form

Although not always required for validity, the written form is highly favoured in commercial law, where parties frequently choose such form even when not mandated by law. This is primarily to achieve legal certainty and ensure proof of the contract’s existence and content, since the courts deciding commercial cases rely heavily on documents as evidence. A contract in written form is concluded either:

• by signature, where it is sufficient for both parties to sign the same document, or for each side to sign the copy intended for the other; or
• by exchanging letters or using another medium that allows the content and the identity to be determined with certainty.

Qualified Form

For contracts concerning especially sensitive matters, the law may require forms beyond a simple written document, necessitating a public notary’s actions – either:

• signature verification (ovjera);
• notarisation (potvrda/solemnizacija); or
• drafting (javnobilježnički akt).

Examples of contracts requiring this highest level of form are sale and purchase agreements of limited liability companies or gifting of real property without immediate transfer of possession.

The concept of pre-contractual liability (culpa in contrahendo) is explicitly regulated in Croatian law under Article 251 of the COA. It reflects the fundamental principle that, while negotiations preceding the conclusion of a contract are generally non-binding, a party is held accountable if they conduct or break off negotiations contrary to the principle of good faith and fair dealing.

Grounds for Liability

Specific scenarios where a party may incur pre-contractual liability are:

• negotiating without real intent – in practice, it may be difficult for the claimant to prove this lack of inner intention, but relevant evidence might include proving that the defendant lacked the necessary legal or economic conditions (eg, not being registered for provision of services that were being negotiated);
• breaking off negotiations contrary to good faith; and
• breach of confidentiality – if one party discloses confidential information or allows the other party access to it during negotiations, the receiving party is prohibited from making that information available to third parties or from using it for their own interests, regardless of whether a contract is ultimately concluded.

Scope of Damages and Remedies

Unfair negotiation conduct may only result in the right to compensation for pre-contractual damage. Croatian courts strictly interpret Article 251(2) of the COA to limit compensation solely to the direct/ordinary damage – ie, the diminution of a party’s assets resulting from expenditures incurred for the purpose of conducting the negotiations. The injured party cannot claim compensation for lost profit, since that would disregard the fundamental principle that pre-contractual negotiations do not obligate parties to contract.

The breach of the duty of confidentiality carries a distinct remedy. Here, the injured party is entitled to seek compensation for the damage caused and to demand the restitution of the benefit that the damaging party achieved through the breach.

The standard terms and conditions are defined in Article 295 of the COA as provisions composed by one party for use in a large number of subsequent agreements, which are proposed to the counterparty either before or at the moment when the contract is concluded. These terms may be incorporated either by being contained directly within the document itself or by being explicitly referenced (usually in the case of insurance companies or banks). Standard terms supplement the contract’s special terms, and generally are equally binding. However, in the event of a conflict, the special terms agreed by the parties always take precedence.

Main Types of Such Agreements

General terms and conditions

This is a list of written provisions formulated in advance, which the parties may use in such a way that all of the provisions or some of them are included or referenced in the contract.

Standard contracts (tipski ugovori)

These are contracts where one of the parties proposes a prepared standard draft of the contract – ie, in essence, an offer to conclude the contract, with a possibility to negotiate and change the suggested provisions.

Adhesion contracts (“take it or leave it”)

Here the content is entirely determined by one party, while the other party can only accept or refuse. These contracts are very common online, as clickwrap agreements (clicking the “I agree” box) or browsewrap agreements (simply browsing a website). From a Croatian law perspective, browsewrap agreements might be problematic because it might not be clear whether the terms were published in the usual manner and whether the counterparty was aware of the contract and its content.

Terms

These are standard terms drafted by international agencies or business associations, which the parties explicitly include in their agreements. An example of such terms commonly used in Croatia is Incoterms.

In order for standard terms to legally bind the counterparty, the following requirements must be met:

• the terms must be published in the usual manner;
• either the terms must be included in the text of the contract or the contract must reference them; and
• the counterparty must have been familiar with them, or must have been familiar with them at the time the contract was concluded – the requirement of presumed knowledge establishes a flexible criterion, particularly in the case of a constant business relationship.

Statutory provisions of the COA provide protection for the weaker party (including non-consumers), stipulating when the terms are null and void (Article 296). Likewise, in the event that an ambiguous term arises in a contract prepared by one side, it must be interpreted in favour of the other party (the contra proferentem rule of Article 320(1)).

Under Article 296 of the COA, a specific provision within the standard terms may be declared null and void if:

• it is contrary to the principle of conscientiousness and honesty;
• it causes an obvious inequality in the rights and obligations of the parties to the detriment of the counterparty of the drafter; or
• it threatens the achievement of the purpose of the concluded contract.

The above is applicable even if the general terms containing such provisions were approved by a competent authority. However, it is not applicable (and the contract shall thus not be null and void):

• if the content was taken from applicable regulations;
• if it was individually negotiated before the conclusion of the contract, and the other party was able to influence the content; or
• in situations where the provisions on the subject matter and price are clear, understandable and easily noticeable.

The courts monitor whether the terms are null and void ex officio, by observing all circumstances existing before and at the time the contract was concluded, the legal nature of the contract, the type of goods or services, and the context provided by other provisions within the contract.

Croatian law lacks specific statutory provisions or published judicial practice concerning the outcome of a battle of forms, which arises when both parties attempt to incorporate their own general terms into an agreement.

The legal foundation for addressing this issue stems from the general principle (Article 264 of the COA) that a response to an offer which modifies or supplements it actually constitutes a rejection of the original offer, and is considered a new counter-offer. The prevailing position in Croatian legal doctrine seems to support the “last shot” rule – ie, that the general terms of the party who sent the final communication before the contract was deemed concluded would be incorporated into the agreement.

On the other hand, a contrary opinion in Croatian legal literature distinguishes between the situation before and after performance. Before performance, given that general terms form a significant component of the contract, the lack of consensus means that either party could claim they are not bound. However, if the parties proceed to execute the agreed-upon basic obligations, it is inferred that they have abandoned the application of their mutually inconsistent general terms. This approach aligns with the “knock-out” rule, meaning the contract is valid based on the terms they did agree upon, but the conflicting general terms of both sides are excluded – thus, any gaps created by the exclusion of these contradictory terms are then filled by applying the relevant dispositive rules.

Croatian contract law generally embraces freedom of form, though certain transactions require stricter formalities.

Signature Verification

Certain contracts require signatures to be verified by a notary public. The verification must be done physically – ie, in person. The most common examples are contracts on real property sale and transfer of ownership.

Notarisation

Some agreements must take the form of a notarial deed (drafted/notarised by a notary public) for validity or direct enforceability. These include, for example:

• transfer of business shares in a limited liability company;
• loan agreements and other contracts containing an enforceability clause;
• pledge agreements over movable or intangible assets registered in the FINA Collateral Registry; and
• gifting of real property without immediate transfer of possession.

Electronic Signatures

The form and validity of electronic signatures remain governed by strict legal standards. Under the EU eIDAS Regulation and its Croatian implementing act, three types of electronic signatures exist: simple (SES), advanced (AdES) and qualified (QES).

Only QES carries the same legal weight as a handwritten signature – ie, only QES may be validly used in those instances where the written form is required (as explained in detail in 3.1 Necessary Form). Other types of signatures may be used in situations where written form is not required and the parties only conclude it for their internal or evidentiary purposes.

In addition to a certain type of form (eg, signature verification or notarisation), for certain commercial and civil law contracts, registration is necessary to achieve legal effect. This is particularly the case for those contracts involving the transfer of real property rights or corporate status changes. For example, ownership over real property is not acquired solely by executing a contract but only becomes legally effective upon registration in the Land Registry.

Likewise, agreements creating security interests – such as pledge agreements on movables, corporate shares or receivables – are entered into the Register of Judicial and Notarial Security of Claims. Foundational contracts for commercial entities – such as the deed of incorporation for a limited liability company – are registered with the Commercial Court Register.

Under Croatian law, mutual consent between the parties is only one necessary element for a commercial contract to be legally effective. Other cumulative elements for validity prescribed by the COA are:

• the parties’ contractual capacity (meaning the legal capacity) and an authorised representative (in the case of legal entities);
• lawful and possible subject matter;
• voluntary declaration of will – ie, consent must be given freely, seriously and without error, duress or fraud; and
• specific form or registration in certain cases, as described in 3.1 Necessary Form.

Without these requirements, a contract may be null and void or voidable, even if the parties have agreed in principle.

The foundational legal framework for both business-to-business (B2B) and B2C contracts in Croatia is the COA, which regulates the creation, execution and termination of contractual obligations in a generally unified manner, with specific exceptions for both B2B and B2C contracts. The main law governing B2C contractual relations is the Consumer Protection Act (CPA), which serves as the basic and general regulation for consumer protection as a group, and applies exclusively to B2C relations.

B2B

B2B contracts are defined in Article 14(2) of the COA as agreements concluded between two traders in the course of professional activities of at least one of them, or connected to performance of that activity. These contracts are characterised by a requirement for increased diligence from the traders, resulting in stricter rules compared to civil or consumer contracts.

The COA contains several provisions that are applicable to commercial contracts only – for example:

• Article 29(1) prescribing different default interest rates for commercial and for other civil contracts;
• Article 111(4) stipulating that a guarantor in commercial obligations is generally joint and severally liable;
• Article 384(4) on determination of price when the commercial contract does not specify it; and
• Article 403(1) prescribing a shorter deadline to inspect the bought item than is the case for civil contracts, etc.

B2B relations are also regulated in other legislation, such as the Companies Act and the Financial Operations and Pre-Bankruptcy Settlement Act.

B2C

B2C contracts are those concluded when a natural person acts as the buyer outside their economic or professional activity, with a seller acting in their professional activity. These contracts are characterised by the consumer’s weaker position relative to the trader, resulting in the application of milder rules designed for consumer protection.

In addition to the CPA and the COA, several other acts regulate consumer rights, such as the Consumer Credit Act, the Consumer Housing Loans Act, the Consumer Alternative Dispute Resolution Act and other special acts transposing EU Directives. These acts govern specific sectors, providing detailed or additional protection to consumer rights. If the provisions of the CPA as the general act contradict those of a special act, the special act takes precedence (due to the principle of lex specialis derogat legi generali).

Of course, certain EU consumer protection laws apply directly, such as Regulation (EU) 2023/988 of the European Parliament and of the Council of 10 May 2023 on general product safety.

The core consumer protection is that consumers cannot waive the rights granted to them by law, and any contractual provision attempting to alter these rights to the consumer’s detriment is deemed null and void. Simultaneously, application of unfair, misleading or aggressive business practice is explicitly forbidden (Article 34 of the CPA).

The CPA explicitly lists:

• 35 trader actions considered unfair by law in all circumstances and without the need to conduct a procedure to assess their impact on the average consumer (the black list);
• 27 actions always considered misleading business practices (Article 37); and
• eight actions always considered aggressive business practices (Article 40).

The fundamental rights protecting consumers include:

• protection of economic interests;
• protection from danger to life, health and property;
• legal protection;
• information and education;
• association of consumers for the purpose of protecting their interests; and
• representation of consumers and participation of consumer representatives in bodies that resolve issues of their interest.

These core rights entail (among others):

• the right to accurate, non-deceptive information regarding a product;
• protection against the misrepresentation of consumer legal rights;
• the prohibition of labelling products as “free” if the consumer must incur costs beyond unavoidable delivery costs;
• protection against dual quality of products;
• prohibiting the use of harassment or coercion; and
• the right to submit a written complaint.

Liability for damage in Croatia is categorised into three types, differentiated fundamentally by the nature of the harmful act from which they arise.

Non-Contractual Liability

This stems from a civil law delict, which is an unlawful human act or omission that causes damage. Since the provisions on non-contractual liability for damage are also general provisions on liability for damage, Article 349 of the COA explicitly states that, unless otherwise stipulated in the provisions on contractual liability (Articles 342 to 348 of the COA) or on pre-contractual liability (Article 251 of the COA), the provisions of the COA on compensation for damage arising from non-contractual relations applies accordingly.

Contractual Liability

This arises specifically when the damage is caused by the breach of an existing contractual obligation. A breach includes non-fulfilment, flawed fulfilment or delay in fulfilling the agreed-upon obligation.

Pre-Contractual Liability

This arises during the phase of negotiations preceding the conclusion of a contract (as explained in detail in 3.2 Concept of Culpa in Contrahendo).

Under Croatian law, damages are compensatory and there is no concept of punitive damages. When it comes to contractual liability, Article 346 of the COA stipulates that the creditor is entitled to compensation of the pecuniary damage (ordinary damage and loss of profit) and fair compensation for non-pecuniary damage.

Ordinary or Gross Negligence

If the contractual breach occurred due to ordinary negligence, liability is capped based on foreseeability – ie, the creditor is entitled only to compensation (ordinary damage and loss of profit) that the debtor must have foreseen at the time the contract was concluded as a possible consequence of the breach. Foreseeability is judged according to objective criteria (the diligence of a prudent businessman or professional).

Conversely, liability extends to full compensation without regard to foreseeability in cases of fraud, intentional non-performance or non-performance due to gross negligence. The creditor bears the burden of proving fraud, intent or gross negligence, as these forms of fault are not presumed.

Contractual Maximum Liability

Parties may modify the rules regarding the extent and amount of compensation, which includes agreeing on the highest amount of compensation. Such a contractual limitation is valid provided that the agreed-upon amount is not in obvious disproportion to the damage, and provided the law does not dictate otherwise for that specific case. However, very importantly, in the case of a debtor’s intent or gross negligence, even if the compensation was contractually limited, the creditor retains the right to full compensation.

Croatian law recognises the concept of liability without fault (objective liability) within the domain of extra-contractual liability. While contractual liability is generally based on the subjective criterion of presumed fault, extra-contractual liability may be founded on the objective criterion of causality – ie, holding the wrongdoer liable regardless of their personal fault.

The injured party’s position is generally more favourable under objective liability rules because the potential for the wrongdoer to be exempted from responsibility is narrow. Exemptions are strictly limited to providing evidence of force majeure or demonstrating that the damage resulted from the actions of the injured party or a third person.

Specific categories in Croatian law where forms of objective responsibility are applied include:

• liability for damage caused by a dangerous item or activity in Article 1064 of the COA;
• liability for damage caused by a motor vehicle in Article 1069 of the COA;
• liability for a defective product in Article 1073 of the COA; and
• special cases of liability in Articles 1081–1084 of the COA (liability of an events organiser, liability due to refusal to provide emergency aid, liability for a failure to conclude a contract, liability concerning the performance of public interest activities).

The COA generally allows parties flexibility in modifying the rules regarding the extent and amount of compensation for damages. The parties may agree in the contract to limit or completely exclude the debtor’s liability for damages caused by a breach of contractual obligation, typically through the inclusion of so-called exoneration clauses. However, there are also mandatory limitations on this contractual freedom, primarily dependent on the degree of the debtor’s fault.

Mandatory Limitations

Croatian law severely restricts the limitation of liability in cases involving intent or gross negligence. Any provision that attempts to exclude or limit liability for damage caused by the debtor’s intent or gross negligence is considered null and void.

The parties may contractually limit or exclude the debtor’s responsibility for damages resulting from ordinary negligence. However, even a clause that limits or excludes liability for ordinary negligence can be challenged and potentially voided by the court in specific circumstances, upon the request of the interested party, if:

• the agreement resulted from the debtor’s monopolistic position; or
• the agreement generally resulted from an unequal relationship between the parties.

Impact of Standard Terms

Exoneration clauses are most frequently used in standard form contracts. When a clause restricting or excluding liability is negotiated or incorporated, the mandatory rules of Article 345 COA apply to protect the weaker party. Therefore, if the clause originated from an unequal relationship between the parties (monopolistic or generally unequal), regardless of whether it was individually negotiated or part of standard terms, it may be subject to annulment if it limits or excludes liability for ordinary negligence.

Croatian law provides relief from contractual performance in the absence of specific provisions defining force majeure within the commercial contract. This is done through general provisions of the COA concerning external events and impossibility of performance.

Force Majeure

Relief may be granted under the concept of force majeure (Article 343), which allows the debtor to be exempted from liability for damages resulting from delay or non-fulfillment due to extraordinary, external and unpredictable circumstances they could not prevent, remove or avoid. Where performance becomes permanently impossible due to such external events, the debtor’s primary obligation is extinguished (Article 373), as is the reciprocal obligation of the other party.

Relief based on force majeure requires the debtor to cumulatively satisfy a strict set of criteria, since the concept is interpreted narrowly and restrictively by Croatian courts. The prerequisites for receiving relief from liability (Article 343 ZOO) or extinguishment of the obligation due to impossibility (Article 373 ZOO) are that the event must satisfy objective, subjective and temporal criteria:

• the event must be external, extraordinary and have harmful consequences;
• the event must be unforeseeable, unpreventable, unavoidable or insurmountable, and the affected party must not have contributed to the event’s occurrence; and
• the circumstances must have arisen after the conclusion of the contract, and before the obligation was due.

The party seeking relief bears the burden of proof to demonstrate that all cumulative criteria for force majeure were met. Likewise, the affected party must show that the event could not be prevented, avoided or overcome by applying the required standard of care (such as the diligence of a prudent businessperson). Even while exposed to force majeure, the debtor must continue to act with the diligence of a conscientious businessperson in relation to the obligation.

It is standard practice for commercial contracts governed by Croatian law to include specific clauses detailing relief from performance in circumstances outside a party’s control, such as a force majeure clause, despite the existence of general statutory provisions. The parties frequently use these clauses to explicitly define the concept of force majeure and enumerate specific examples. Events often listed in such clauses include war, riots, strikes and natural disasters such as earthquakes, major fires, storms and floods.

The absence of a specific force majeure clause in a commercial contract would not prevent a party from claiming relief, as the general rules set forth in the COA regarding the definition and criteria of force majeure apply even when the contract is silent on that topic.

Article 369 of the COA provides the legal principle of “changed circumstances” (clausula rebus sic stantibus). This allows a party impacted by substantial hardship, where performance has become excessively difficult or causes excessive loss, to seek the amendment or termination of a contract, even in the absence of specific contractual provisions.

Conditions

For a party to gain the right to request modification or termination of the contract, the following prerequisites must be met.

• The circumstances must be extraordinary and must have appeared after the contract was concluded. These circumstances could involve (for example) natural events, political and social changes, administrative measures or economic incidents.
• The circumstances could not have been anticipated at the time the contract was concluded, nor avoided.
• The change caused the fulfilment of the obligation for one party to become excessively difficult or caused that party excessive losses.

Remedies

The affected party must formally request the court to modify or terminate the contract as it cannot be terminated by a simple unilateral declaration of will. The opposing party has the right to refuse the termination of the contract by offering or agreeing to a fair modification of the contract terms. If the court terminates the contract, at the request of the other party, the court will oblige the party that requested it to compensate a fair part of the damage suffered as a result due to termination.

Under Croatian law, the concept of hardship (changed circumstances) applies automatically based on statutory provisions, even when not expressly included in the agreement, unless the parties explicitly exclude it in accordance with Article 372 of the COA. Such exclusion, however, must not conflict with the principle of conscientiousness and fairness.

In commercial practice, while the statutory framework provides a safety net, it does not impose a formal duty on parties to renegotiate before resorting to judicial intervention. Consequently, a good contractual practice might be to incorporate explicit hardship clauses that oblige the parties to attempt renegotiation as a first step, before initiating court proceedings.

The provisions of the COA grant the party faithful to a contract (the creditor) robust rights and mechanisms when encountering non-fulfilment, late fulfilment or breach of terms. The creditor holds the fundamental right to:

• demand fulfilment of the obligation; or
• seek the termination of the contract.

By contrast, the debtor generally cannot unilaterally terminate a contract and simply pay damages as a substitute for fulfilling their contractual obligation, as the fundamental principle governing obligations is the duty of performance.

Crucially, the right to compensation for damages is preserved regardless of whether the creditor opts for fulfilment or termination. Non-fulfilment can cause both pecuniary and non-pecuniary damage, and compensation must cover both the loss suffered and lost profit. For late fulfilment, the debtor is liable for damages caused by the delay, even if the creditor grants a subsequent deadline for performance.

Delay in Performance

The process for termination by the creditor varies depending on the nature of the fulfilment deadline.

• Fixed term: if the deadline is an essential element of the contract, non-performance by the debtor results in the contract being terminated by virtue of law (ipso iure). The creditor must immediately notify the debtor if they wish to hold the contract in force.
• Non-fixed term: if the deadline is not essential, the creditor must first grant the non-performing debtor an appropriate subsequent deadline for fulfilment. If this additional period expires without performance, termination occurs.
• Termination is explicitly prohibited if the breach constitutes the non-fulfilment of a negligible part of the obligation.

Termination Consequences

Upon termination, both parties are generally released from their primary contractual obligations – except, of course, for liability concerning damages. The party who fulfilled the contract (fully or partially) has the right to demand the return of what was given. If natural restitution is impossible, the obligation converts to repaying the monetary equivalent, assessed based on prices at the time of the judicial decision. The party returning money must pay statutory default interest running from the day the payment was originally received.

Generally, parties to a commercial contract under Croatian law can deviate from the main warranty and remedy provisions concerning non-fulfilment, late fulfilment and breach of terms. This ability stems from the fundamental principle of freedom to contract, and specifically COA Article 368 governing the effects and consequences of contract termination, which is dispositive in nature.

To exercise this freedom, in practice it is usual for the parties to do the following.

• Incorporate specific clauses that allow unilateral termination based on predetermined reasons. Common examples of such clauses are clausula irritatoria (giving the right to withdraw if the other side fails to perform their obligation) and lex commissoria in sales agreements (giving the seller the right to withdraw if the buyer fails to pay the price in the agreed-upon time).
• Contractually define the timeframe for fulfilment as an essential element of the contract. If the debtor fails to perform within this specified term, the contract is terminated automatically, eliminating the need for the creditor to grant a subsequent deadline for performance and thus streamlining the remedy process.
• Specify their own mutual rights and obligations, should a breach lead to termination.

It should be noted that this freedom is not absolute, as the parties cannot regulate their relations contrary to mandatory regulations (such as those governing the statute of limitations) nor to the principle of conscientiousness and fairness. For example, while parties may contractually waive the right to invoke changed circumstances (clausula rebus sic stantibus) for certain specified events, a blanket waiver that violates the principle of conscientiousness and fairness is generally not allowed. Therefore, while commercial parties have latitude to tailor their remedies, they must ensure that their clauses do not go against mandatory legal requirements or public order.