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In everyday life and when concluding contracts, we often encounter the concept of general terms and conditions, or GTC for short, yet they are often overlooked. The primary function of GTCs is to simplify the contracting process by providing a framework for recurring, template-like provisions that can be uniformly applicable to all contracting parties (e.g., performance deadlines, invoicing rules, dispute resolution mechanisms, or the choice of governing law in the case of a telephone subscription). As a result, individual agreements between the parties can remain concise and focused, containing only the specific terms – such as the parties’ details, the precise description of the product or service, and any deviations from the GTCs.
Pursuant to Act V of 2013 on the Civil Code (“Civil Code“), contractual provisions that are determined in advance, unilaterally, by one party without the involvement of the other party are considered GTS. We would like to point out that these provisions only become part of the specific contract if the applying party allows the other party to become familiar with them prior to the conclusion of the contract and the other party expressly or implicitly accepts them.
However, there are a number of misconceptions about GTCs in the public perception, which we would like to clarify in this article.
- Only a document named “GTC” qualifies as GTC
The first common misconception is that only documents labelled “GTC” can be considered GTC. However, the scope, form, method of recording, or the fact that the terms and conditions are included in the specific contract or appear separately from it are irrelevant for the purposes of classification as GTC. For example, an announcement or business regulations, or even a unilateral statement, may qualify as GTC if it complies with the definition of the Civil Code. In other words, whether something qualifies as GTC or not must be examined and assessed in terms of content, not form.
- It is not possible to deviate from the GTC
It is a common misconception that the GTC is a kind of “take it or leave it” agreement, i.e., that they must be accepted in their entirety and cannot be deviated from. The GTC can only become part of the contract with the consent of the other party, and furthermore, individual agreements between the parties may deviate from certain terms of the GTC. If the parties agree on a certain condition (e.g., the amount of the late payment penalty), the individually negotiated condition becomes part of the legal relationship between the parties, not the relevant provision of the GTC.
- General Terms and Conditions cannot be applied in parallel
A common misconception regarding GTCs is that only one party’s GTCs can be applicable in a contractual relationship. In practice, especially in B2B relationships, it often happens that both contracting parties have GTCs that they wish to apply in their relationship with each other. Of course, the partieshave the opportunity to do so.. At the same time, an important question arises as to which GTCs should be considered applicable in the event of the simultaneous application of two GTCs, especially in the case of conflicting provisions, and how their terms and conditions can be reconciled.
According to the Civil Code, if the provisions of the GTCs conflict with each other in terms of their essential content, no contract is concluded between the parties. If there is a conflict between the two GTCs, but the difference does not affect an essential element of the contract, the contract is concluded between the parties, and the non-conflicting provisions of the GTCs also become part of the contract. In the event that there is no conflict between the two GTCs, both GTCs will form part of the contract.
Although the Civil Code basically regulates the possibility and manner of applying parallel GTCs, it is easy to see that this involves a number of uncertainties that may give rise to disputes over interpretation (e.g., what constitutes an essential condition, a contradiction, or a practice that deviates from market standards). In order to avoid these uncertainties, it is highly recommended that the parties thoroughly review each other’s GTCs during the contract negotiation process and properly reconcile their contents.
- The GTC may be amended unilaterally at any time by the party applying them
As mentioned in the introduction, a pre-condition for the application of the GTC is that the contracting partner has the opportunity to become familiar with the GTC and then accept its contents. The explicit purpose of this provision is to enable the contracting partner to familiarize themselves with the conditions that are binding upon itself. For this reason, the Civil Code also stipulates that the drafter of the general terms and conditions has a separate obligation to provide information if they wish to amend the GTC or any of its provisions. This is because the amended provision only becomes part of the contract if the other party accepts it, at least by implied conduct. This information is particularly important because the amendment may result in the other party refusing to accept it and thus terminating the contractual relationship.
- Any contractual terms, even those that deviate from general or previously applied practice, may be included in the GTC without restriction
GTCs, especially in the case of contracts concluded with consumers, are often accepted without the contracting parties having thoroughly familiarized themselves with their content. Although this behavior cannot be attributed to the party applying the GTCs, it can easily lead to abuse of rights.
For this reason, the party applying the GTC must specifically inform the other party of any general contractual terms that differ significantly from the provisions of the law or that differ in any way from the usual contractual practice established between the parties. An example of the first case is the ruling of the Court of Appeal of Budapest-Capital, which stated that the stipulation of a one-year limitation period in the case of an insurance relationship differs significantly from the five-year limitation period stipulated by law. Accordingly, the clause only becomes part of the insurance contract if the insurer expressly draws the contracting party’s attention to it and the contracting party makes an express statement of acceptance in full knowledge of this.
Summary
The everyday presence of GTCs greatly facilitates the conclusion of contracts, but their use can also carry hidden risks. The provisions of the GTCs become part of the contract in the same way as the separately negotiated terms and conditions, so it is extremely important that the parties are aware of the content of it as well. We would like to point out that the contracting party has the option to initiate the amendment of disadvantageous GTC provisions and to deviate from them by means of an individual agreement. Accordingly, it is advisable to exercise increased caution when applying GTCs.
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