From 22 August 2025, the Hungarian Civil Code will introduce new provisions on faulty performance that extend consumer protection rules to certain micro, small, and medium-sized enterprises (SMEs). The amendment is part of Act LXVII of 2025, aimed at strengthening fair competition, preventing abuse of market power, and protecting smaller businesses when acting outside their usual commercial activities.
Scope and Applicability
The key change is that SMEs acting outside their core business, profession, or trade will now benefit from the special protections previously reserved for consumers. This includes:
- Micro-enterprises: fewer than 10 employees, annual turnover or balance sheet ≤ €2 million
- Small enterprises: fewer than 50 employees, annual turnover or balance sheet ≤ €10 million
- Medium enterprises: fewer than 250 employees, annual turnover ≤ €50 million or balance sheet ≤ €43 million
Enterprises in which the state or local government owns 25% or more of capital or voting rights are excluded from these provisions.
Policy Rationale
The legislative intent is to ensure:
- Fair economic competition, in line with Hungary’s Constitution
- Protection against abuse of market dominance
- Strengthening of rights and contractual positions of SMEs, in particular when negotiating with larger enterprises
- Increased market predictability for smaller businesses
By extending consumer-style protections to SMEs in these circumstances, the law aims to prevent market distortions caused by unequal bargaining power and enhance economic stability.
Practical Implications
For many Hungarian SMEs, the new provisions will facilitate the enforcement of claims arising from faulty performance. For example:
- Warranty claims will now enjoy consumer-level protections, potentially including longer statutory deadlines
- SMEs gain a stronger contractual position vis-à-vis larger partners
- Increased legal clarity and protection may help prevent disputes and reduce litigation risk
However, some practical questions remain:
- How will authorities define whether a transaction falls within or outside the enterprise’s usual business activity?
- What tax consequences might arise from declarations that a specific transaction falls outside the business scope?
- Detailed procedural rules and SME-specific rights will be provided in a forthcoming government decree
- Real-world application will depend on court and authority practice over the coming years
Action Points for SMEs
SMEs should consider:
- Reviewing existing contracts for potential impact
- Establishing internal processes to identify transactions outside core business activities
- Evaluating possible tax implications related to these transactions
- Preparing for enforcement of claims under the new consumer-style protections
How We Can Help
At Katona & Partners Law Firm, we assist SMEs with:
- Understanding and implementing the new Civil Code provisions
- Contract review and risk management
- Enforcing claims arising from faulty performance
- Navigating the evolving legal and regulatory environment
📩 Contact us to ensure your business can fully leverage these enhanced protections, strengthen contractual rights, and safeguard commercial interests under Hungary’s updated Civil Code.
Katona & Partners Law Firm
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobile: +36 70 344 0388
Fax: +36 1 700 27 57
g.katona@katonalaw.com
www.katonalaw.com