Contractual penalty in reservation agreement

The Supreme Court of Czech Republic (decision 33 Cdo 3448/2012, as of 24.7.2013), repeatedly pronounced his opinion to the validity of contractual penalty which is very often negotiated by purchase of real estate.

 For consideration of validity of agreement on contractual penalty in reservation agreement is decisive between which persons should be the reservation agreement concluded and which obligation should be secured. If the reservation agreement is concluded between broker (real estate agency) and future purchaser, only these persons shall be bounded by such an agreement. If the broker does not act as a proxy of the future seller, in the agreement cannot be negotiated the contractual penalty which shall secure the obligation of the future purchaser to conclude the purchase agreement with the future seller in definite period.