Contracts are vital for business transactions, and Thai law offers entrepreneurs a wide variety of legal options when contractual disputes arise. Our firm can help you understand the legal framework surrounding contracts, breaches, and remedies under the country’s Civil and Commercial Code.
Generally, contractual terms are construed by looking at their purpose and literal meaning. However, the concept of good faith is also an important consideration.
In Thailand, there is a legal framework in place to ensure that contract breaches and remedies are properly addressed. The Civil and Commercial Code outlines the general rules governing the interpretation of contracts and sets forth specific breach remedies. Generally, the non-breaching party can seek damages, which are monetary awards designed to compensate them for their losses resulting from the breach, or specific performance, a court-ordered requirement that the breaching party fulfill its contractual obligations as originally stipulated.
We often assist our clients with international and local breach of contract disputes involving service and labor agreements, loan and lease agreements and real estate agreements. These dispute cases can be resolved through informal methods, such as sending a demand letter or arbitration and mediation if stipulated in the contract, but if these methods don’t work, it is sometimes necessary to file a lawsuit at the Thai Court. Damages that can be caused by a breach of contract include financial compensation for the lost profits, cost of re-doing the work and the lost opportunity.
The courts can order specific performance of a contract if monetary compensation is insufficient to remedy a breach. Specific performance requires the breaching party to fulfill their contractual obligations. This remedy can be a useful alternative to damages where the breach has caused a direct financial loss.
Unlike English contract law, where express terms are clearly written in the contract, Thai courts often interpret contract terms based on good faith and custom or commercial practice rather than their strict literal meaning. This can make it difficult to determine the common intention of parties, particularly in interpreting NDAs that contain confidentiality clauses.
In addition to proving causation, you must prove that you suffered a loss due to the breach. This can be done through evidence such as receipts and invoices, or by examining the breaching party’s business records. You can also claim expectation and consequential damages, which compensate you for the difference between what you expected to receive and what you actually received.
Cancellation or Rescission
Contracts are the cornerstone of most business relationships and in many cases create legal obligations. When those contracts are breached, a party can seek remedies from the non-breaching party.
The most obvious remedy is damages, aiming to compensate the non-breaching party for financial losses caused by the breach. However, the court can also order specific performance, requiring the breaching party to fulfil its contractual duties as agreed upon. Additionally, the court may cancel or rescind the contract, returning both parties to their pre-contractual positions. This can be a useful remedy in situations of fraud or misrepresentation.
Some contracts include clauses specifying a fixed amount that must be paid in the event of a breach, known as liquidated damages. These are enforceable as long as they are reasonable and reflect anticipated losses. Lastly, if other methods of dispute resolution are unsuccessful, the parties may resort to litigation in a Thai court. This is more time-consuming and costly but provides a formal and binding resolution.
Statute of Limitations
When legal action is required to enforce a contract, it may be brought in a Thai court. The courts are open to the public and are normally staffed by judges rather than jurors.
The most common remedy for breach of contract is damages which are intended to compensate the non-breaching party for financial losses resulting from the breach. Specific performance is another possible remedy which compels the breaching party to fulfill their contractual obligations as agreed. It is also possible for the non-breaching party to terminate a contract in the event of a material breach.
In some cases a party may be held liable for breaches of both contract law and another area of law such as consumer protection or fraud. Such concurrent liability is referred to as extra-contractual liability. This collection examines issues concerning extra-contractual liability in selected civil, common law and hybrid jurisdictions. Specialist advice should be sought on your individual circumstances.