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Product liabilty rules are changing

Commercial Law, Competition law and consumer protection, News / / , , , ,

Reading time: 4 minutes

Considering modern technological developments, it has become necessary to rethink product liability regulations, as a result of which the European Parliament and the Council have adopted Directive 2024/2853 (“Directive“) on liability for defective products and repealing Council Directive 85/374/EEC. The aim of the Directive is to promote a balance between the responsibility of economic operators and a high level of consumer protection. To comply with the Directive, whose provisions must be implemented by Member States into their national legislation by 9 December 2026 at the latest, the Ministry of Justice has drafted amendments to private law, including a comprehensive review of the product liability rules of the Act V of 2013 on Civil Code (“Civil Code“). In this article, we present the new rules on product liability.

What is a product?

The comprehensive reform of EU regulations was prompted by technological developments: the spread of digital and smart devices has brought new risks, which are addressed by the Directive and, through its implementation, by Hungarian regulations. One of the most significant innovations is that, based on the Directive, the Civil Code extends the concept of a product: Under the new provisions, any movable item is considered a product, even if it is incorporated into or connected to another movable item or immovable property, including electricity, digital manufacturing files, raw materials, and software. This means that the new liability rules will apply to products placed on the market or put into service after 9 December 2026, including digital manufacturing files and software, whether they are sold as stand-alone products or integrated into other devices.

However, free and open-source software developed or made available in the course of non-commercial activities is exempt from these regulations.

Who bears the responsibility?

The basic principle of product liability is that, to protect consumers, it imposes obligations on economic operators who are responsible for damage caused by defective products. Under the new rules, the scope of persons who can be held liable is expanded, meaning that product liability may be imposed on the following economic operators:

The manufacturer of the product is primarily responsible for any defects in the product, i.e., the party who develops, manufactures, produces, labels the product as the manufacturer, or develops, manufactures, or produces the product for their own use.

If the defect is caused by an integrated component, the manufacturer of that component shall also be liable if the component was incorporated into a product under the manufacturer’s control.

If the product or its component parts originate from a manufacturer operating outside the European Union, responsibility lies with the company importing the product into the EU, i.e. the company placing the product on the EU market, and the manufacturer’s authorized representative.

If the importer or the manufacturer’s authorized representative is also not based in the EU, then the logistics service provider is responsible, i.e. anyone who offers at least two of the following services in the course of their commercial activities: storage, packaging, addressing, and shipping of a product, without owning the product in question.

The distributor shall also be liable if the person responsible cannot be identified and, at the request of the injured party, does not identify the economic operator or distributor listed above.

In addition, if a natural or legal person substantially modifies a product without the manufacturer’s knowledge or control and then distributes or puts it into service, that person is also considered a manufacturer under the law and may be liable for product damage.

A new provision is that the manufacturer of a defective product is jointly and severally liable for product damage with other economic operators cooperating with it, such as the component manufacturer or importer, so that the consumer can claim full compensation from any of them. The economic operator providing compensation to the injured party may then recourse against the other responsible economic operators.

When is a product considered defective?

A product is considered defective if it does not provide the level of safety that is generally expected of that type of product or that is required by EU legislation or relevant domestic regulations. When assessing the level of safety, factors such as the reasonably foreseeable use of the product, the date of placing on the market, and the reasonable expectations of consumers must be considered. At the same time, the mere fact that a more advanced or modern version becomes available after the product’s release—whether in the form of an update or a completely new product—does not in itself render the previous model defective. The basis for assessing a defective product is therefore not its comparison with the latest technological standards, but rather whether it provides the level of safety that could be expected at the time of its manufacture.

When can the manufacturer, importer, or other economic operator be exempt from liability?

Economic operators may be exempted from product liability under certain conditions if they can prove that the defect causing the damage did not arise within their sphere of responsibility or was not foreseeable.

The manufacturer or importer shall be exempt from liability if they can prove that they did not place the product on the market or put it into service. The distributor may be exempt if they can prove that they did not make the product in question available on the market.

Any economic operator may be exempted from liability if they can prove that the defect in the product was not likely to exist at the time of placing on the market, putting into service or distribution, or that it only arose after that time. However, this provision shall not apply if the defect of the product is related to a service associated with the product under the manufacturer’s control, to software accompanying the product (including software updates or upgrades), to the absence of software updates or upgrades necessary to maintain safety, or to a material modification of the product.

Liability shall also be excluded if the defect of the product results from compliance with legal requirements (e.g., adherence to a mandatory technical standard that caused the defect), or if the defect could not have been detected based on the state of scientific and technical knowledge at the time the product was placed on the market or put into use, or while the product was still under the manufacturer’s control.

Unchanged provisions

The manufacturer and other liable parties are subject to product liability for a period of 10 years. The injured party must still prove the defect in the product, the damage suffered, and the existence of a causal link between the defect and the damage. There is a three-year limitation period for asserting claims, which begins from the date on which the injured party became aware or could reasonably have become aware of the occurrence of the damage, the defect in the product, and the identity of the responsible economic operator.

Summary

The Directive and its domestic implementation bring significant changes to product liability regulations. With these amendments, both the definition of “product” and the scope of parties who may be held liable for damages caused by defective products are expanded. The concept of a product now includes software, digital manufacturing files, and related services, meaning that the liability framework also applies to modern, digital, and complex technologies. This implies that economic operators will need to act with greater caution and awareness in the design, manufacture, distribution, and modification of products in the future.

The aim of the new regulation is to strengthen consumer protection against modern product risks, while at the same time imposing greater liability on economic operators. In light of these changes, it is essential for the affected companies to review their operations, internal processes, contracts, and liability insurance practices.

Photo source: pexels.com, Lukas

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The most important things to know about mothers and employees with young children returning to work

Employment, labour law, News / / , , , , , , , ,

Reading time: 5 minutes

The birth of a child is a significant event in a human ‘s life, which also has a major impact on the professional and work-related life of employees. Given the importance of becoming a parent, the Hungarian labour law contains numerous provisions aimed at promoting the proper development and care of children and protecting mothers and parents with young children.

According to Act I of 2012 on the Labor Code („Labour Code“), mothers are entitled to 24 consecutive weeks of maternity leave (CSED) and parents of young children (until the child reaches the age of 3) are entitled to unpaid leave (GYED, GYES) for the purpose of caring for their children.

During the care and upbringing of a child, there may come a point when the desire to return to work arises. However, it is important to note that during the parent’s absence, numerous changes may occur in the employee’s personal circumstances and in the employer’s organization, because of which the employee’s previous employment conditions may no longer be guaranteed or may no longer be appropriate. The Labor Code contains detailed rules for reconciling the differing interests of employees and employers and for protecting social objectives. In this article, we summarize the most important rules related to this topic.

General rules applicable in all cases

Announcement of return

According to the Labor Code, the employee may specify the date of his/her return, but when indicating the date, to comply with the obligation to cooperate, the employer must be given at least 30 days’ notice. Therefore, the employee must give notice of his/her intention to end unpaid leave taken for the purpose of caring for a child at least 30 days before the end of the leave.

Wage adjustment

Given the wage increases that occur during the employee’s absence, a situation may arise where the wages of the employee with young children are less than their colleagues. This situation clearly violates the requirement of equal treatment, thus the Labor Code stipulates that the employer is obliged to make an offer to adjust the wage after the absence has ended. For the purposes of making an offer, the average annual wage increase applied by the employer to colleagues working in the same position as the employee must be considered. If there are no other employees in the same position, then the average annual wage increase implemented by the employer on a company level shall be the reference point.

Granting leave

The entire duration of maternity leave and the first six months of unpaid leave taken for the purpose of caring a child are considered leave-entitling periods, meaning that the employee’s leave entitlement accrues even during his/her absence. As a general rule, the employer must grant this accumulated leave within 60 days of the employee’s return (typically before the employee actually returns to work).

Changes in terms and conditions of employment

Generally, the employer is obliged to employ the employee upon his/her return in accordance with the original conditions (e.g., working hours, job description, place of work). However, it is easy to see that during the employee’s absence, changes may occur on both sides (e.g., the employee relocates, termination of his/her position), which would make employment (under the same conditions) no longer possible or would cause the parties to temporarily deviate from it (e.g., part-time employment). The parties may, of course, amend any terms and conditions or terminate the employment relationship by mutual agreement, but in certain cases and under certain conditions, they may also be entitled to do so unilaterally.

Modification of employment conditions upon the request of the employee with young children

In order to facilitate the appropriate development of young children, the Labor Code provides employees with young children with the opportunity to request changes to their employment conditions (e.g., place of work, remote work, part-time work) under certain conditions.

In the context of changes to employment conditions, we would like to point out that employers are often subject to a prior notification obligation, i.e. they must inform employees about the availability of part-time and remote working positions.

In certain cases, employers are obliged to comply with requests from employees with young children without consideration, while in other cases, the feasibility of the request and its acceptability by the employer may be examined.

The employer is obliged to respond to requests that are subject to employee justification or employer discretion within 15 days. If the employer fails to do so or rejects the request without justification, the employee has the right to challenge the decision before a court, so it is advisable for employers to prepare in advance for the return and employment of parents with young children and to establish appropriate procedures.

Special rules relating to termination of employment

Employees are forbidden to be dismissed during pregnancy, maternity leave, paternity leave, parental leave and leave of absence taken without pay for caring for a child. After the employee’s return, this absolute prohibition no longer applies, but until the child reaches the age of three, the employer has limited rights to terminate the employee’s employment in certain cases. Termination on grounds related to the employee’s abilities or the employer’s operations (e.g., cessation of the employee’s position) may only be given if there is no other suitable vacant position or if the employee has rejected an offer of the position. It is also important to note that the fact that the employer filled the employee’s position by a way of hiring another employee in the meantime does not in itself constitute a legal basis for termination of employment, as the employee has the right to be employed in their original position. Termination based on conduct may only be given if it meets the requirements for termination without notice.

Summary

Overall, it can be stated that the Labour Code contains numerous restrictions regarding the return to work and employment of mothers/parents with young children in order to take into account the individual circumstances of employees. However, it is important to emphasize that the interests of employees are not exclusively protected, as the legislator considers the economic aspects of employers in many respects.

Photo source: pexels.com, Yan Krukau

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General obligations of the employer in the event of a change in the employee’s health

Employment, labour law, News / / , , , , , , , , ,

Reading time: 5 minutes

During the course of employment, situations may arise where an employee’s health condition changes, either temporarily or permanently. This may result, for instance, from an accident-related injury, post-surgery rehabilitation, treatment of a chronic illness, or even partial loss of working capacity. In such circumstances, a key question for the employer is to what extent and in what manner they are required to adapt work organisation and working conditions to the employee’s altered health status.

In this respect, the employer bears not only legal but also social responsibility — the way an employer handles changes in employees’ health conditions is a key indicator of responsible employment. However, it is important to define the limits of the employer’s duty to adjust and take appropriate measures, as this obligation may vary depending on the specific case and circumstances (e.g. the employer’s available resources). The following article provides guidance on situations where the employee is still considered fit for work but experiences a change in their state of health.

General Obligations

Pursuant to Act I of 2012 on the Labour Code (hereinafter: the “Labour Code”) and occupational safety regulations, employees may only be employed for work that, in view of their physical constitution, development, and state of health, do not have adverse consequences for them. Furthermore, it is the employer’s fundamental responsibility to ensure that work is performed under safe and healthy conditions that do not pose a risk to the employee’s well-being. This obligation applies throughout the entire duration of the employment relationship and includes continuous assessment. Accordingly, if an employee’s health condition changes over time, the employer is required to take appropriate measures in response to the situation.

In practice, this may involve temporary adjustments (e.g. part-time work, reduction of physical strain) or minor organisational changes (e.g. reassignment of certain tasks, review of working logistics).

Limits of the employer’s obligations – the principle of reasonableness

It is important to emphasise that the employer’s obligation to take measures is not unlimited. According to Section 6 of the Labour Code, which sets out the “principle of reasonableness”, the employer is only required to modify working conditions or reorganise work to the extent that is realistically and fairly expected under the given circumstances — that is, as long as doing so does not impose a disproportionate economic or organisational burden on the employer. The assessment of this obligation must always be based on the specific circumstances of the individual case, considering the employer’s economic and organisational capacity, as well as the nature of the employee’s health-related limitations.

In general, the employer is not required to:

create a new position,

hire additional staff, or

make significant investments

solely to ensure the continued employment of the affected employee.

The case law of the Curia (Supreme Court of Hungary) also confirms that the extent of the employer’s obligation must always be determined by the specific circumstances of the case. For example, if an office employee temporarily cannot type due to a broken hand, the employer is obliged to provide lighter or alternative administrative tasks during recovery but is not required to establish a new position.

The situation differs, however, when a professional driver is subject to a medical opinion imposing (not merely temporary) restrictions on their ability to perform driving duties. In such a case, even by modifying the working conditions, the employee would not be able to perform the essential functions of their role. Considering the principle of reasonableness — as a limitation on the employer’s duty to adapt and take measures — the continued employment of the worker would impose a disproportionate burden on the employer. Therefore, with appropriate justification, the termination of the employment relationship would be considered lawful.

Summary

The employer is required to adjust working conditions to the employee’s (changed) state of health where this is necessary to ensure safe and healthy working conditions. However, this obligation is not unlimited: under the principle of reasonableness set out in the Labour Code, the employer is only required to take measures to the extent that they do not impose a disproportionate burden. Accordingly, the extent of adaptation expected from the employer must always be assessed on a case-by-case basis, considering the specific circumstances and available resources, in order to determine what level of adjustment is reasonable to enable the continued employment of the affected worker. For a lawful and fair procedure, it is advisable to involve the employee, the occupational health physician, and—where necessary—the occupational safety specialist in the decision-making process, and to maintain transparent documentation of the measures taken. This approach ensures not only the protection of the employee’s interests but also the employer’s lawful and compliant operation.

Image source: pexels.com, Karolina Grabowska

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The cessation of AVDH and the related tasks of companies

Corporate law, News / / , , , , , , , ,

Reading time: 4 minutes

Electronic administration has undergone significant changes in recent years with the introduction of the Digitális Állampolgári Program (DÁP). The previously widely used document authentication (AVDH) has been phased out and is now completely obsolete. Given that this has a significant impact on the way individuals and companies conduct their electronic administration (e.g. ePapír administration, either as individuals or through the Company Gate), we outline below the essence of the changes, the parties affected and the practical steps to be taken.

AVDH in brief

AVDH was previously a free document authentication solution available to all users with a client gate. It was a widely applicable, easily accessible and simple to use service, and was also considered suitable for corporate signatures. Documents authenticated with AVDH were considered private documents with full probative force, so they could be used in a wide range of procedures and administrative processes.

The general availability of AVDH ended at the end of last year, so it could only be used in a limited scope, integrated into the ePapír service. This meant that when individuals and companies submitted documents to government agencies (e.g. to the labour authority) via ePapír, they could authenticate their submissions and attachments with AVDH, thus eliminating the need for electronic signatures.

Changes in November

On 31stOctober 2025, the AVDH service was completely discontinued (i.e. in official procedures as well). It was replaced by a service for user document assignment (FEDOR) with significantly reduced functions, starting from 1 November 2025.

However, FEDOR does not provide nearly all the features of its predecessor. The FEDOR service does not replace the signature, but only assigns it to the individual, so it does not result in a fully probative private document. However, for an electronic document to be considered authentic, it must at least have the probative value of a private document (and an electronic time stamp).

Necessary steps

Given that authentic electronic documents must be submitted during electronic administration, authorities currently ask clients to resubmit the appropriate documents in cases where the documents do not qualify as private documents with full probative value.

Under current legislation, documents bearing a qualified electronic signature or an advanced electronic signature based on a qualified certificate are considered private documents with full probative value, so the documents to be submitted must be signed with one of these.

In order to ensure that the company’s communication with authorities does not become impossible, we know that many companies have quickly opted for a qualified electronic signature provided by a Hungarian trusted service provider. However, it is important to note that choosing the right partner in the long term opens up many more opportunities for digitisation.

Practical options

Private individuals have access to the eAláírás function provided by DÁP, which is considered a qualified electronic signature. However, it is important to note that this can only be used by private individuals, i.e. the DÁP eAláírás function is not suitable for corporate signatures under the provisions of the law, so business organisations will have to look for other solutions.

Qualified electronic signatures and advanced signatures based on qualified certificates can only be provided by so-called trust service providers. It is important to note that this is regulated at European Union level, which means that such services can be used not only from the three providers registered in Hungary, but also from providers registered in any EU Member State, as Member States are obliged to accept them. In Hungary, the National Media and Infocommunications Authority (NMHH) is the competent supervisory authority, which maintains this register, and the list of registered service providers can be found here. Service providers registered in the various EU Member States can be accessed via the following link.

It is also important to note that it is, of course, possible to act through an authorised representative (e.g. a private individual, accountant, legal representative) in electronic procedures, in which case the authorised representative must have the appropriate signature.

Summary

With the complete discontinuation of the previously widely used AVDH service, an appropriate electronic signature is required to use the ePapír service.

Although this may initially be perceived as a burden by those affected, electronic signatures can be used in a much wider range of applications and can practically replace the role of previous paper-based signatures entirely. Electronic signatures may, of course, entail additional costs, but it should also be noted that their use reduces several other costs (e.g. paper, printing, postage, courier and travel costs). Given that there are several types of electronic signatures, which result in different types of documents with varying degrees of evidential value, and that they can be used in a wide range of situations (e.g. company procedures, employment relationships, official notifications), it is definitely advisable to consider the purpose and scope of use when selecting a specific service (signature type). In our practice, we have assisted numerous group of companies with their digital transition, and we can clearly state that companies choose different service providers based on their varying priorities (e.g., mass document uploading, document management, a wide range of signatories, signatures that can be provided to employees by their employer, cost).

Photo source: pexels.com, Karola G.

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Special rules in case of foreign founder(s) and/or managing director(s)

Corporate law, News / / , , , ,

Reading time: 4 minutes

Introduction

In the following article, we have compiled the most important topics that inevitably arise in the life of companies with foreign members or executives. Regardless of the type of foreign person, if he plays a role in the company’s life from a company law viewpoint, there are a few additional matters that will certainly arise during the company establishment or change procedure.

Company extract of the foreign member

If a foreign legal person becomes a member of a company, either at the time of incorporation or later, or if there is a change in its data (e.g., the foreign member’s registered seat changes), the foreign company’s company extract or other document with identical content (e.g., a notarial statement), and its certified Hungarian translation must be submitted to the Court of Registry. The purpose of this is to certify the

registration of the foreign company under its own law,

data of the foreign company, and

person(s) authorized to represent the foreign company.

In this case, the foreign company member must request its company extract from its own court of registry/registry authority, which must then be prepared in a certified Hungarian translation by a qualified translator.

Delivery agent

If a foreign legal person or a foreign natural person, who has no address in Hungary holds a position in the company (e.g., member or managing director of the company, member of the supervisory board, etc.), he/she must designate a person to be his/her delivery agent.

A delivery agent can be an organization with its registered seat located in Hungary or a natural person with a permanent residence in Hungary. This is a frequently asked question, thus it is important to clarify that members of the company, its management and supervisory board members are not allowed to perform such a function. This means that if the only member of the company is a foreign entity, its delivery agent cannot be the company’s managing director, even if he or she has Hungarian nationality and residence.

The function of the delivery agent is to receive and deliver certain documents (e.g., court/authority documents) addressed to the foreign person. The reason for this is obviously the difficulty and cost of delivering documents abroad, which the authorities/courts do not want to bear. In the case of a delivery agent, the law provides for a presumption as to the date of delivery: the foreign person is presumed to have knowledge of the document on the 15th day following the day on which it was duly delivered to the delivery agent.

It can therefore be seen that the task of the delivery agent is important and crucial, as he/she often has to forward notices, requests to foreign addressees with tight deadlines, the failure to comply with which may entail serious legal consequences.

Tax identification number

Although few people are aware of it, since 2018, the executive officer of the company, or in certain cases its member or shareholder, who does not have a tax identification number, is required to request one from the National Tax and Customs Office.

It is often the case, for example, that the foreign managing director performs his/her position on the basis of a free-of-charge mandate agreement, in which case no taxable income is generated in Hungary. In such cases, the absence of a tax identification number does not necessarily arise from a tax viewpoint. However, companies are obliged to use electronic communication, via Company Gate. The managing director(s) can register a Company Gate on the basis of their existing Client Gate access, which requires the Hungarian tax identification number.

The prominent role of e-signatures

There is no doubt that with the increasing use of electronic signatures processes are becoming faster, more convenient and more efficient for all of us. This is even more true in case of companies with a foreign person(s). If, for example, the company has foreign members and managing directors, even from different countries, signing certain documents can take weeks and incur unnecessary costs (e.g., courier services, travel, notarization). With e-signatures, however, this time can be reduced to minutes or even seconds, as it takes just a few clicks to place 1 signature and there are no associated costs beyond providing the e-signature.

In legal procedures, such as company proceedings, it is also possible for the legal representative to identify the signatories online, also within a few minutes, saving additional time and costs.

It is therefore worth considering the use of electronic signatures, which can be a convenient, time- and cost-effective solution, and can have the same legal effect as a physical signature.

Photo source: pexels.com, Kampus Production

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Capital difficulties and their possible remedies in case of limited liability companies

Corporate law, News / / ,

Reading time: 4 minutes

 

The preparation and adoption of the annual accounts each year is an important step in the operation of a company as it clearly shows the results of the previous financial year. Act V of 2013 on the Civil Code (“Civil Code“) provides for a number of capital requirements and the obligation to intervene to remedy them for the purposes of protection of creditors. In our article below, we will examine the possible cases of undercapitalization and the legal solutions available, focusing on the rules governing limited liability companies.

Cases of undercapitalization

The Civil Code defines four cases, when the members are obliged to intervene and provide additional necessary funds or decide on appropriate restructuring of the capital structure. These are, in summary, the following:

  • the company’s equity capital has fallen below the minimum amount of registered capital laid down by law
    • an LLC can be established with a minimum registered capital of HUF 3 million, therefore this case arises if the equity capital is less than HUF 3 million
  • the company’s equity capital has fallen to half of the registered capital due to losses
    • with regard to the case of undercapitalization above, this can only arise if the registered capital exceeds the minimum amount, so for example its amount is HUF 10 million. In this case the members shall intervene, when the equity capital is HUF 5 million, or less
  • the company is threatened with insolvency or has stopped making payments
    • threat of insolvency is a situation where the directors of a company foresee, or with reasonable diligence should foresee, that the entity will not be able to meet its obligations as they fall due
  • the company’s assets do not cover its debts
    • this is the case when the company’s debts (e.g. debt, loans from members, other claims against the company) exceed the company’s total assets.

Obligation to intervene

In the event of undercapitalization, the Civil Code imposes specific obligations on both the managing director and the members.

The managing director shall without delay convene the members’ meeting (sole member) or initiate the decision of the general meeting without holding a meeting in order to take the necessary measures.

Members shall then decide on a solution to the situation and the adopted measures shall be implemented within 3 months. If the undercapitalization is due to the fact that the company’s equity capital dropped to half of the registered capital due to losses, and the members are unable to eliminate this within 3 month, the company’s registered capital must be reduced.

Possible actions by members

Members can remedy the cases of undercapitalization in several ways, as follows:

  • supplementary payment
    • in the event of authorization in the articles of association, the general meeting may impose a supplementary payment obligation on the members to cover losses
    • in addition to the authorization, the articles of association must specify the maximum amount of supplementary payment that members may be required to pay, as well as the frequency with which such payments may be imposed. If these conditions are not met, supplementary payment may not be made even with the support of the general meeting
    • in connection with the supplementary payment, it must be stated that its amount does not increase the financial contribution of the members. The supplementary payment may only be used to cover losses and, as a general rule, any unused supplementary payment shall be returned to the members
  • reduction of capital
    • in this case the members reduce the registered capital of the company, which entails a reduction in the member(s)’ business quotas;
    • it is important to note that this can only happen if the original registered capital exceeds the minimum value of the registered capital set by law, i.e. HUF 3 million
  • to provide equity capital by other means
    • it is clear that, compared to the previous measures, this is an open option, i.e. it is not possible to define in a taxonomy exactly what actions may be appropriate in this regard;
    • such possible solution for example: granting/cancelling loan by the members, assumption of (intra-group) debt from the company. However, it is also important to consider the tax implications of these possibilities
  • transformation, merger, division and dissolution without legal succession
    • if the members do not decide on supplementary payment, reduction of the capital, provision of equity by other means, the members must decide on transformation, merger, division or dissolution without legal succession
    • of course, there is no obstacle to members taking such a decision immediately, if they so wish and if their other conditions for such decision are met

Summary

As can be seen from the above, there are a number of options available to restore the limited liability company’s capital position. Which of these options is the most appropriate cannot be generally determined, as it is always necessary to look at the specific company, its characteristics and the underlying causes of undercapitalization on a case-by-case basis, and to identify which measures offer a real long-term solution.

Image source: Mikhail Nilov, pexels.com

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5 misconceptions about the general terms and conditions (“GTC”)

Commercial Law, News, Trade affairs / / ,

Reading time: 5 minutes

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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

Image source: Kampus Production, pexels.com

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The scope of employer control in assessing liability for damages

Employment, labour law, News / / ,

Reading time: 5 minutes

The concept of employer control is one of the most important aspects of labor law, determining the employer’s liability for damages caused to the employee. Strict rules apply to employer liability under Act I of 2012 on the Labor Code (hereinafter: “ Labour Code“), as the employer is objectively liable for any damage caused to the employee in connection with the employment relationship. The employer may be exempt from liability in two cases. The first is if it can prove that the damage was caused by circumstances beyond its control, which it could not have foreseen and could not have been expected to prevent or mitigate. Another possibility for exemption for the employer is if it can prove that the damage was caused solely by the unavoidable behaviour of the aggrieved party.

This article examines the scope of control relevant to the first exemption option, the definition of which is key to determining liability.

The definition of the scope of control

Liability for damages means that the employer is liable for damage caused to the employee in connection with the employment relationship. Several factors must be taken into account when assessing liability, such as:

  • the employee’s conduct,
  • the working environment provided by the employer, or
  • the working methods used.

In order for the employer to be exempt from liability for damages, it is necessary to examine the circumstances of the damage in order to determine whether they fall within the employer’s scope of control.

The difficulty lies in the fact that the concept of control is not defined in the Labor Code. According to the developed judicial practices, the scope of control refers to the extent to which the company  is able to control and direct the activities of its workers.. This includes all circumstances over which the company has actual influence, and which it must create in order to ensure that the employees have the necessary working conditions and a safe working environment. The scope of control therefore includes all objective circumstances that the employer had any possibility of influencing, including working methods that could lead to an accident.

The scope of control generally includes the following:

  • the place of work,
  • working hours,
  • work equipment
  • working methods,
  • performance of tasks, and
  • related personal conduct,
  • work organization.

The scope of control is not necessarily limited to the company’s registered office or premises, as depending on the circumstances of the specific case, the employer may also be entitled and obliged to create safe working conditions at other locations (e.g. at a construction site managed by the employer or in the case of international transport). so, in certain cases, transport conditions may also fall within the scope of the control.

The importance of the scope of control in relation to accidents

If an employee suffers an accident, it must be classified from both an occupational safety and social security perspective.

  • An accident is considered a work accident if it occurs during or in connection with organized work. For example, if the incident occurs while the employee is traveling, transporting materials, moving materials, cleaning, using organized workplace catering, occupational health services, or other services provided by the employer in connection with their work.
  • Accident at work is a social security category that classifies accidents in terms of entitlement to benefits. An accident at work is an accident that occurs to an employee during or in connection with work performed in the course of their employment, so work accidents generally fall into this category. However, an ccidents that happen to employees while traveling to or from work or their place of residence (accommodation) are also classified as accident at work, but these are not work accidents, but so-called accidents on the journey.

In the event of a work accident, the employer may be liable for damages, in which case the employer is obliged to compensate either the employee for the entire damage or, if the employee contributed to the accident, for part of the damage. The employer is obliged to investigate the work accident; in doing so, it must uncover the circumstances of the accident, such as the condition of the machines and equipment, the availability of protective equipment, and knowledge of and compliance with the rules of work, which are generally considered to fall within the employer’s scope of control. Thus, all circumstances that the employer has control over and that lead to a work accident constitute grounds for employer liability.

Judicial practice

The developed judicial practice is fundamentally very strict and considers all facts and circumstances that the employer had the opportunity to influence to be within the employer’s scope of control.

An extreme individual decision also evaluates the employer’s expectations and instructions in this context:

According to the findings, the truck driver was transporting raw leather and, following his employer’s instructions, spent the night in his truck at a rest stop, where he fell seriously ill after being bitten by an insect. The accident occurred during the employee’s rest period, over which the employer has no control. The court nevertheless ruled that the circumstance causing the damage, i.e., the insect bite, fell within the employer’s scope of control, since the employer had expressly required the vehicle and cargo to be guarded, thereby also giving instructions on how to spend the rest period. The employee thus acted in the employer’s interest even during his rest period. The Supreme Court found that the employer had influence over the conditions, but failed to avoid the circumstances within its control, as a result of which the employee suffered damage, and therefore ruled that the employer was liable for damages.

Summary

The employers’ liability rules established by the Labor Code set strict conditions for exemption in the event of damage, which is why it is extremely important for employers to ensure safe working conditions, take appropriate health and safety measures, periodically reviewing these measures, and, in the event of a work accident, applying corrective mechanisms to prevent further similar accidents. When an accident occurs, it is advisable to carefully document the circumstances, as these will form the basis for the court’s assessment.

Image source: pexels.com, Mikael Blomkvist

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The European Data Protection Board’s strategy and the proposal to ease the GDPR to reduce the administrative burden on businesses

Data protection, News / / , ,

The European Data Protection Board’s strategy and the proposal to ease the GDPR to reduce the administrative burden on businesses

Reading time: 4 minutes

The European Data Protection Board has published its report for 2024 (“Report“) again this year, setting out the fundamental goals of its strategy for the period up to 2027, one of them is to promote compliance with data protection rules. In May this year, the European Commission (“Commission“) submitted a proposal (“Simplification Proposal“) aimed at simplifying the GDPR in order to reduce the administrative burden on businesses, which was also welcomed by the European Data Protection Board. In this article, we summarize the main conclusions of the Report and future strategy of the Board, and address the Simplification Proposal.

The role of European Data Protection Board in the field of data protection

The European Data Protection Board’ has a multifaceted mission and legal mandate:

  • ensures the consistent application of EU data protection rules,
  • promotes effective cooperation between data protection authorities in the European Economic Area (EEA),
  • supports the harmonised enforcement of the GDPR,
  • examines issues relating to the application of the regulation,
  • issues guidelines, recommendations, and best practices to promote the consistent application of the GDPR and review their application where necessary.

Key findings of the Report

The European Data Protection Board may examine and issue an opinion on any matter of general application or having implications in more than one Member State, at the request of any supervisory authority, the Chair of the European Data Protection Board, or the European Commission. The European Data Protection Board continues its activities this year, adopting new guidelines on pseudonymization, which we discussed in this article. The European Data Protection Board announces coordinated enforcement actions every year. In 2024, it focused on the right of access, while in 2025, it plans to review the enforcement of the right to erasure, as reported in this article.

The European Data Protection Board also continued its active dialogue with data subjects and organizations involved in data processing, which resulted in the publication of articulate factsheets. For example, in a such factsheet, the Board presented the most significant positive and negative effects of artificial intelligence on cybersecurity. (The factsheet in English can be opened in this link).

Strategy for the period between 2024-2027

In its strategy for the period 2024–2027, the European Data Protection Board has set out four main pillars of objectives.

  • promoting consistent application of data protection rules and compliance,
  • strengthening international cooperation between data protection authorities,
  • ensuring data protection in an emerging digital environment covering multiple regulatory areas (e.g., artificial intelligence),
  • support for global dialogue on privacy and data protection issues.

The Board also confirmed that it intends to continue to play an active role in shaping the regulatory environment for small and medium-sized enterprises („SME”). In addition, it has set as a priority to help SMEs comply with the law through specific tools and to contribute to raising public awareness of the importance of data protection rights.

Simplification Proposal

The Commission pointed out that the complexity of EU legislation hinders market entry and limits growth potential. In order to achieve the objective, set out in the report, in May 2025 it published its fourth so called omnibus package, in which the Commission proposed amendments to various EU rules, including those relating to GDPR rules on record keeping obligation.

According to the GDPR the record of processing activities currently is a fundamental tool for data controllers and processors to identify and document their data processing activities. For illustrative purposes only, we mention that such elements the purpose of data processing, the categories of data subjects and recipients, the retention period, and, where applicable, the transfer of data to third countries.

According to the applicable regulation, data controllers and data processors are only exempt from the obligation to maintain their record of processing activities if they employ fewer than 250 persons. However, companies with fewer than 250 employees are also required to keep records if

  • the processing is likely to result in a risk to the rights and freedoms of data subjects;
  • the processing is not occasional;
  • the processing concerns special categories of data or personal data relating to criminal convictions and offenses.

Due to the subjective nature of the list, we recommend that companies striving for compliance keep records in all cases in order to minimize risks.

This was also recognized by the Commission, namely that even with a threshold of 250 employees, there were very few cases in which companies were exempt from the record keeping requirement. Therefore, according to the Simplification Proposal, in the future, companies that employ fewer than 750 employees and whose turnover does not exceed EUR 150 million or whose total assets do not exceed EUR 129 million will not be required to keep records. Data processing activities that are expected to impose a high risk on data subjects, such as employees or customers, would continue to be subject to the company’s record keeping obligation.

The Commission estimates that this measure would exempt around 38,000 businesses in the EU from the registration requirement and reduce the administrative burden on businesses by around EUR 400 million per year.

The European Data Protection Board expressed its endorsement of the Simplification Proposal. At the same time, it also made data controllers aware of the fact that keeping records of data processing activities not only makes it possible to comply with the regulations but also serves as a useful tool for meeting other GDPR requirements.

In summary, it is clear that companies are still expected to:

  • have up-to-date information regarding their data processing (whether with or without a record);
  • ensure transparency in data processing and to take data processing considerations into account when designing their processes.
  • consciously consider what documentation obligations they have;
  • to enforce the stricter regulations in key areas.

Image soruce: pexels.com, Marco

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The employer’s opportunities to enforce financial claims against the employee

Employment, labour law, News / / , , ,

During the employment relationship, the payment of remuneration is one of the fundamental obligations of the employer, which also constitutes the basis of the employee’s livelihood. Given its important role, Act I of 2012 on the Labour Code (“Labour Code“) contains detailed rules on the types, amounts, methods of payment, and protection of wages. We often encounter the question of how an employer can enforce its claim against an employee, for example in the event of damages or other claims arising from the employment relationship. In this article, we summarize the simpler options for enforcing the financial claims of employers outside of litigation.

Deduction from wages

In view of the rules on the protection of wages, the employer may only apply deductions from the employee’s wages within the legal framework and under certain conditions. While the provisions governing the categories and conditions of deductions are contained in the Labor Code, the limits on the amount of deductions are set out in Act LIII of 1994 on Judicial Enforcement („Vht.”).

Conditions for deduction:

    • As a general rule, employers are only entitled to deduct wages from employees on the basis of law or an enforceable order. In other words, the employer is obliged to deduct any taxes imposed on wages or claims deemed enforceable by a court. However, it is important to emphasize that in such cases, the employer is typically not pursuing its own interests.
    • With the employee’s consent, the employer is also entitled to deduct the employee’s wages. However, the consent must be explicit, and the deduction may only be applied to wages exceeding to the deduction-free part of the wages.
    • The employer shall also be entitled to deduct its claim from the wages if it arises from advance payment.

Limits on deductions in terms of their amount:

The Vht. stipulates that only the employee’s net salary may be used for enforcement. As a general rule, 33 percent of the debtor employee’s net salary may be subject to enforcement, but in exceptional cases, the deduction may reach up to 50 percent of the net salary.

We refer to the fact that with the entry into force of the relevant provisions of Act LXXIV of 2024 on the establishment of Hungary’s central budget for 2025 (“Amendment“), the exemption rules on income deduction were amended as of 1 July 2025:

    • Pursuant to the Amendment, the family tax allowance under Act CXVII of 1995 on personal income tax (“Szjatv.”) is exempt from the deduction. This means that when determining the basis for deduction, the amount arising from the debtor’s net salary due to the applicable family tax and contribution allowances must be disregarded. However, the exemption shall only apply to enforcement proceedings initiated on or after 1 July 2025.
    • A further change relating to deductions is that the portion of net income exempt from deduction has been increased from HUF 60,000 to 60% of the net minimum wage. This sum is currently HUF 116,029 which must be paid to the debtor employee in all cases.
    • The rule remains unchanged that if the amount payable to the employee after the deduction exceeds HUF 200,000, the amount exceeding HUF 200,000 may be enforced without restriction.

The payment notice as an alternative method of enforcing the employer’s claim:

As a general rule, the employer can only enforce its own claims arising from the employment relationship against the employee through court proceedings or payment orders. However, the Labour Code also provides for a special option for enforcing claims, namely payment notice. The biggest advantage of a payment notice is that it is much faster and simpler than litigation or payment order proceedings.

The employer may enforce claims against the employee and related to the employment relationship that do not exceed three times the minimum wage (currently HUF 872,400) by means of a written payment notice. However, it is important to note that in the case of claims arising from the same legal basis, the employer may only issue one payment notice. Thus, the employer has no opportunity to enforce its claim exceeding HUF 872,400 by issuing several different payment notices. In such cases, the employer may enforce its claim in accordance with the general rules, i.e. in court or through a payment order procedure.

The employer must always justify the payment notice. Therefore, a payment notice complies with the law if it is clear to the employee why it was issued. In addition to written form and the obligation to provide justification, notification on legal remedies is an essential element of payment notices.

This is because if the employee does not appeal against the payment notice within 30 days, the court will issue an enforcement order and it will become directly enforceable. It also means that, in the absence of notification on legal remedies, the payment notice cannot be accompanied with an enforcement clause.

Summary

Overall, we can conclude that the employer may only enforce its own claims arising from the employment relationship directly against the employee’s wages if the conditions specified in the law are fulfilled.

Given that the employee’s salary is the basis of his livelihood, in the event of deductions, the criteria set out in the Labor Code and the restrictions on the amount of deductions set out in the Vht. must always be taken into account.

A payment notice can be a quick and effective alternative to enforcing a claim, but it can only be issued up to a certain amount and under certain conditions.

If you have any questions regarding the above, please do not hesitate to contact us.

Image source: cottonbro studio, pexels.com

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