Contract Review in Thailand

Contract Review in Thailand. A thoughtful contract review in Thailand is more than legal proofreading — it is a risk-management exercise that combines Thai statutory rules, commercial practice, enforceability analysis, and regulatory checks specific to the subject matter (real estate, services, distribution, M&A, government procurement, etc.). This guide explains what to check, why it matters in the Thai context, and a practical workflow to convert a contract from a raw draft into an enforceable commercial instrument.

Legal foundations you must keep in mind

Thai contract law is codified in the Thai Civil and Commercial Code (CCC); general principles of offer/acceptance, capacity, performance, breach and remedies are contained in the CCC and applied with reference to Supreme Court jurisprudence. Understanding which CCC provisions apply to your contract (for example rules on interpretation, default obligations, and force majeure) is the starting point for any review.

Arbitration clauses are treated as independent and are widely used in international contracts involving Thai parties; foreign arbitral awards are commonly enforced in Thailand under applicable treaties and domestic law, but the precise drafting of the arbitration clause (seat, rules, language, emergency relief) can make or break enforceability.

Thailand recognizes the concept of force majeure in practice and in statutory language (used to determine excusable non-performance), but whether a disruption qualifies depends on the clause language and the facts — many disputes turn on how the clause is drafted and whether the party invoking it took reasonable steps to mitigate.

Key clauses and specific Thai issues to review (line-by-line)

Below are the contract clauses a reviewer should interrogate and the specific Thailand angles that commonly cause disputes.

1. Governing law & dispute resolution

   • Confirm whether the parties want Thai law, foreign law, or a split (Thai law for validity; foreign law for interpretation). If arbitration is selected, the seat matters: “arbitration in Singapore/London” may be easier to enforce internationally, but Thai courts will still be involved at times (e.g., interim measures, annulment). Carefully define seat, rules (ICC/UNCITRAL/THAC/AIAC), emergency arbitrator and interim relief procedures.

2. Scope of work / deliverables / KPIs

   • Make obligations measurable (milestones, deliverables, acceptance tests), and align payment triggers to deliverables. Vague obligations create interpretation disputes under the CCC.

3. Payment, currency & tax

   • Specify currency, payment mechanics, late payment interest (if none specified, statutory default rates may apply), and gross-up wording for withholding taxes. Check VAT implications and whether the counterparty must register for VAT in Thailand.

4. Representations & warranties; conditions precedent

   • Require warranties about corporate authority, non-contravention, valid licenses, good standing. If transaction depends on regulatory approvals (e.g., BOI privileges, foreign business licenses), include clear conditions precedent and timelines.

5. Limitation of liability & indemnities

   • Thai courts will enforce clear limitation clauses, but unconscionable or ambiguous carve-outs (gross negligence, willful misconduct, statutory liabilities) should be carefully drafted. Indemnities should specify scope, caps, and procedure for claiming defense/control of claims.

6. Intellectual property & data

   • Address ownership, license scope, moral rights (important in Thailand for some works), localization of data and cross-border transfers (watch privacy and sectoral rules). Include indemnities for IP infringement.

7. Assignment & change of control

   • Specify whether assignment requires consent and whether permitted to affiliates. For regulated sectors (foreign ownership limits, land ownership), include specific non-assignment or approval steps.

8. Confidentiality & non-compete

   • Define confidential information, carve-outs, duration and remedies — injunctive relief language helps but may need Thai court or arbitrator enforcement.

9. Termination & exit mechanics

   • Draft for clear termination events, notice periods, cure rights, and the economic consequences (termination payments, return of materials, transition support).

10. Notices, language & execution formalities

    • Include valid notice addresses, electronic service rules, and state which language governs (in Thailand, an official Thai translation may be required by authorities — clarify which version prevails on discrepancy).

11. Registration & regulatory compliance

    • For property, leases over 3 years, certain IP assignments, or security interests, check whether registration at Thai government departments (Land Department, Department of Business Development, Customs, etc.) is required to perfect rights.

Special Thai considerations (practical red flags)

• Foreign Business Act & sectoral restrictions — foreign parties must confirm whether the activity requires a foreign business license, BOI approval or other exceptions.

• Land & real estate — majority foreign ownership is limited; leases and purchase mechanisms require close compliance.

• Language & translations — government filings and some courts require Thai language documents; mismatches in names via transliteration often cause practical problems.

• Public procurement & administrative contracts — these may have separate rules and limited ability to arbitrate against a government counterparty.

Practical review workflow (efficient + defensible)

1. First read (10–20 minutes) — identify deal breakers: governing law, termination, payment, exclusivity, regulatory dependencies.

2. Redline the commercial and legal risks — create a risk register (high/medium/low) with recommended fixes and fallback positions.

3. Check enforceability & regulatory due diligence — confirm licenses, BOI status, land title constraints, AML/KYC exposure.

4. Financial & tax check — confirm VAT, withholding tax, and currency/control mechanisms.

5. Draft negotiation playbook — prioritize clauses to negotiate, give fallbacks, and prepare markup with alternative language.

6. Final compliance pass & signature checklist — ensure execution formalities, witnesses/notarization if needed, translation, and registration steps are set out with timelines.

Negotiation tactics that work in Thailand

• Prioritize clear performance metrics and payment security (retention, escrow, performance bonds) where trust is limited.

• If the counterparty prefers foreign seat/foreign law, consider hybrid approach: substantive contract under chosen law but Thai courts for interim measures, or arbitration with predetermined seat and procedural safeguards.

• Use step-in rights and cure periods rather than immediate termination where continuing operations are critical.

Conclusion

A rigorous contract review in Thailand identifies legal and commercial risks specific to Thai statutory rules and regulatory practice and converts them into negotiable items and checklisted compliance steps. Start with the CCC framework, treat dispute-resolution drafting as strategic (not boilerplate), and ensure regulatory and translation issues are resolved before signature. Well-executed reviews reduce enforcement risk, prevent surprise regulatory stops, and create a clear roadmap for remedies if performance fails.