Breach of Contract in Thailand

Breach of Contract in Thailand. Contractual relationships form the backbone of commercial and private dealings in Thailand. As a civil law jurisdiction, Thailand’s legal approach to contract enforcement and remedies for breach is codified in the Civil and Commercial Code (CCC). The system favors predictability and formalism, emphasizing written agreements, good faith, and causation of damages. When a breach of contract occurs—whether through non-performance, delay, or defective performance—Thai law provides clearly delineated remedies. However, procedural efficiency, evidence admissibility, and litigation strategy play significant roles in the practical resolution of such disputes.

This article provides a detailed exposition of how breach of contract is addressed under Thai law, including available remedies, procedural steps, and challenges in enforcement.

1. Legal Framework

1.1 Core Statutory Provisions

Contracts in Thailand are governed by Book II (Obligations) and Book III (Specific Contracts) of the Civil and Commercial Code. Relevant sections include:

• Section 1495–1574 (General provisions on obligations)

• Section 1664–1672 (Damages for non-performance)

• Section 213–218 (Performance, time, place, manner)

• Section 217–219 (Default and consequences)

In addition, specific contract types—e.g., sale, lease, loan, construction—are governed by their respective CCC titles, which may modify general rules.

2. Elements of a Contractual Breach

Under Thai law, a breach of contract is the failure of one party to perform their obligation, in full or in part, within the agreed time or manner. Breach may be:

• Total or partial

• Material or immaterial

• Willful or negligent

For liability to arise, the breach must be accompanied by fault, actual damage, and a causal link between breach and harm, except in strict liability contracts (e.g., deposits under Section 377).

2.1 Types of Breach

• Non-performance: Failure to deliver goods, services, or payments.

• Defective performance: Delivery of non-conforming goods or substandard services.

• Delay in performance: Time-sensitive obligations missed.

• Anticipatory breach: Repudiation before the due date.

3. Remedies under Thai Law

3.1 Damages (Section 222 CCC)

The default remedy is compensation for actual damages caused by the breach. Damages may include:

• Loss of contractual benefits

• Loss of profit (if foreseeable)

• Incidental expenses or mitigation costs

Proof of damage is essential. Courts will not grant speculative or punitive damages.

3.2 Specific Performance (Section 213)

The injured party may demand that the contract be fulfilled as agreed, unless:

• The performance is no longer possible

• Performance requires personal action or discretion

• Compensation is more appropriate or requested instead

Specific performance is common in contracts for sale of immovable property.

3.3 Rescission and Cancellation

Under Section 386, a party may rescind a contract when:

• There is a fundamental breach

• The breach defeats the purpose of the agreement

• The contract expressly allows termination for breach

Notice of rescission must be given, and in bilateral contracts, restitution of benefits is required (Section 391–393).

3.4 Forfeiture and Deposits (Section 377)

If a deposit is given to secure performance:

• The party who breaches may forfeit the deposit

• The non-breaching party may be entitled to double the deposit in return

This is enforceable unless deemed penal or excessive.

4. Evidentiary Requirements

4.1 Written Contracts

Though oral agreements are valid under Thai law, enforcement is far easier with:

• Signed contracts

• Attachments (e.g., specifications, SOWs, invoices)

• Acknowledged communications (email, LINE messages, written notices)

Some contracts, such as sales of immovable property or loan agreements over 2,000 THB, must be in writing per Section 456 to be enforceable.

4.2 Witnesses and Documentary Evidence

Litigation depends heavily on:

• Documentary evidence (contracts, correspondence, financial records)

• Testimony from parties and third parties

• Expert evidence (e.g., for construction defects, valuation of loss)

All evidence must be submitted in Thai, with certified translations if originally in a foreign language.

5. Litigation Procedure

5.1 Filing the Complaint

A lawsuit is filed with the Civil Court of First Instance. The complaint should include:

• Legal basis for the breach

• Supporting facts and timeline

• Description of damages

• Request for relief (damages, specific performance, interest)

Defendants may respond with defenses, counterclaims, or raise issues of non-liability or force majeure.

5.2 Pre-trial Mediation

Thai courts increasingly encourage or mandate pre-trial mediation, especially in commercial cases. If successful, a compromise agreement is submitted as a court-approved settlement.

5.3 Trial and Judgment

• Trials are judge-led

• Evidence is presented orally and in writing

• Witnesses are cross-examined under court supervision

• A written decision is rendered, typically within 60–90 days post-hearing

Interest on damages typically accrues at 5% per annum from the date of filing, unless the contract stipulates otherwise.

6. Enforcement of Judgment

A final judgment must be executed via court order, not automatically enforceable. Steps include:

• Filing a motion for execution

• Seizure of debtor’s assets

• Garnishment of income or bank accounts

• Court-supervised auction, if necessary

The enforcement process can take several months. Litigants must identify assets of the breaching party for execution to be effective.

7. Force Majeure and Excusable Non-Performance

Thai law recognizes force majeure under Section 8 CCC as an external event beyond control. A party may be excused from liability if:

• The event was unforeseeable and irresistible

• It makes performance impossible

Examples include natural disasters, war, or government prohibition. However, economic hardship alone is insufficient.

8. Limitation Periods

Breach of contract claims are subject to statutes of limitation:

• 5 years for most commercial breaches (Section 193/12 CCC)

• 2 years for tort-based claims

• 1 year for hotel, carrier, or insurance-related contracts

Time starts from the date the breach becomes known to the claimant.

9. Cross-Border and Foreign Party Considerations

9.1 Governing Law and Jurisdiction

Thai courts generally apply Thai law unless:

• A valid choice of law clause applies (recognized in international contracts)

• Jurisdiction is challenged, and the dispute falls outside Thai territorial competence

9.2 Language and Translation

All court filings, testimony, and evidence must be in Thai. Foreign parties must use Thai-licensed attorneys; foreign counsel may assist but not represent in court.

9.3 Foreign Judgments

Thai courts do not enforce foreign court judgments directly. The foreign party must refile the case in Thailand. However, foreign arbitral awards may be recognized under the New York Convention.

10. Avoiding Disputes: Best Practices

While disputes cannot always be avoided, risks may be mitigated by:

• Using detailed, bilingual contracts

• Including dispute resolution clauses

• Regular performance documentation

• Retaining written confirmations of key terms and notices

• Consulting with Thai legal counsel when modifying or terminating contracts

Conclusion

Breach of contract under Thai law follows a civil code tradition emphasizing legal certainty, fairness, and procedural discipline. While multiple remedies are available—ranging from damages to specific performance—success in litigation depends on contract clarity, evidentiary documentation, and procedural compliance.

Foreign entities must pay special attention to local legal culture, translation accuracy, and judicial expectations. While Thai courts are generally fair and impartial, litigation is formalistic and best approached with well-prepared legal strategy.