Introduction

The rules of the Hungarian Civil Code (Civil Code) regarding cash debt and late payment will change as of July 1, 2013. The new regulation harmonizes the rules of the Civil Code and the EU directive on combating late payment in commercial transactions. However, in contrast to the Directive the Civil Code makes the rules concerning the due date of cash debt not only applicable to commercial transactions, but any cash debt originating from a contract. The provisions introduced now (with the exception of the provisions concerning procurement) will be included in the New Civil Code effective from 2014 as well.

The amendment includes general provisions applicable to any contract, special rules regarding contracts between business entities and rules concerning contracts concluded with contracting entities as defined by the Procurement Act.

General rules

In case the parties do not agree upon the due date of a cash debt in their contract, as a general rule the debt is due within 30 days from the receipt of the request for payment or the invoice (the default in payment occurs after that date as well). The 30 day deadline is to be calculated from the date of performance if the receipt of the request for payment/invoice preceded the performance, if the date of receipt cannot be clearly established or if the obligor is liable to pay without waiting for the receipt of the request for payment/invoice. As a general rule, the parties may deviate from these rules in their contract.

It is an important change that the base rate of the Hungarian National Bank – in case of payments made in foreign exchange the base rate determined by the central bank issuing that foreign exchange (in absence of such the money market rate) – on the first day of the half-year to which the late payment pertains is applicable to that given half-year regarding both the late payment interest and the so-called equivalent interest.

Rules concerning business entities

According to the amendment, in case of contracts concluded between business entities the above detailed general rules are applicable with the following differences:

  • the late payment interest applicable to a given half-year is equal to the base rate of the Hungarian National Bank – in case of payments made in foreign exchange the base rate determined by the central bank issuing that foreign exchange (in absence of such the money market rate) – on the first day of the half-year to which the late payment pertains increased by 8 percentage points;
  • in case of late payment the obligor must pay an amount equal to the HUF amount of EUR 40 as a collection fee, irrespective whether the obligor has justified its late payment or whether the collection fee is actually incurred (this lump sum does not absolve from other legal consequences of late payment, but is to be involved in the compensation for damages);
  • a contractual term excluding the late payment interest and the collection fee is null and void;
  • contractual terms which unilaterally and unreasonably deviate from the rules of the Civil Code to the detriment of the obligee by violating the requirement of good faith and fair dealing may be challenged by the oblige; a contractual term which deviates from the 30 days’ due date and prescribes a due date exceeding 60 days must be considered as such a deviation, until proven otherwise.

Rules concerning procurement

In connection with the application of late payment rules the entities classified as contracting entities by the Procurement Act were removed from the rules concerning business entities, and the legislator created special rules for such entities. In general, the parties may not deviate from the rules concerning contracts concluded with a contracting authority, however in connection with the due date the parties may agree upon a due date exceeding 30 days but not exceeding 60 days, but only if this is factually reasonable based on the nature of the contract. It must be emphasized that the rules relating to late payment interest of the Civil Code are only applicable to contracts concluded with contracting parties if the subject of the contract is below the procurement threshold, otherwise the rules of the Procurement Act are applicable.