Contracts are the foundation of legal transactions and relationships in Thailand, binding parties to mutual obligations and fostering trust in agreements. But when these agreements are breached, navigating the complex legal landscape can be challenging.
This article explores Breach of Contract in Thailand, shedding light on the legal framework, common forms of breaches, and available remedies.
Legal Framework
Contracts serve as the cornerstone of business transactions and legal relationships in Thailand, as they do in most jurisdictions. The Thai Civil and Commercial Code (TCCC) defines the essential elements of a valid contract, as well as the obligations of parties in case of breach. The law also outlines various remedies and resolution methods for breach of contract in Thailand.
A breach of contract involves one or more parties’ failure to fulfil their contractual obligations as stipulated in an agreement. This can include non-performance, non-payment of agreed upon amounts, and unreasonable delay in completing contractual work. Vague or ambiguous contractual terms can also lead to disputes, especially in situations where the scope of work and performance timelines are unclear.
Remedies for breach of contract in Thailand include damages, specific performance, and termination of the contract. Damages are monetary compensation designed to return the injured party to the position they would have been in had the contract not been breached. This can be in the form of actual damages or stipulated damages, which are a fixed sum established when the contract was originally entered into.
Specific performance involves a court order for the breaching party to fulfill its contractual obligations as stipulated in the agreement. The non-breaching party can also choose to terminate the contract, which releases both parties from their future contractual obligations.
Types of Breach
Contracts are the cornerstone of many business transactions and relationships. They provide a framework for parties to define their rights and obligations, and they can also impose penalties if parties fail to uphold their commitments. Breach of contracts is a common occurrence that can have serious consequences for both businesses and individuals.
While most attorneys will try to settle contract disputes through informal methods like demand letters, in some cases it may be necessary to file a case with Thailand courts. Remedies for breach of contract include damages, specific performance, and rescission. Damages involve monetary compensation that aim to compensate the non-breaching party for any financial losses they suffered due to the breach. Consequential damages often align with what the law calls stipulated or liquidated damages – an amount established when entering into the contract that the court might adjust if it is deemed unreasonable.
Another remedy is specific performance, which involves a court order that requires the breaching party to fulfil contractual duties in accordance with the terms of the contract. Finally, rescission is the cancelling of the contract, returning both parties to their pre-contractual positions. It is important to note that the governing laws of Thailand only allow for legal remedies in the case of breaches of contract if the breach is material. A material breach refers to a significant violation that goes to the core of the agreement, often justifying termination and legal action.
Remedies
Contracts provide a fundamental structure for delineating rights and responsibilities, and when they are breached, the affected party may be entitled to legal redress. A common form of contract violation is failure to fulfil contractual obligations, and the resulting disputes can have significant repercussions for both businesses and individuals.
As with most legal systems, the Civil Code of Thailand outlines a framework for addressing contract-related issues and establishes various remedies available to address breaches. For example, the non-breaching party might be able to claim damages, which aim to compensate for financial losses incurred as a result of the breach. Alternatively, the breaching party might be required to fulfill its contractual obligations as originally agreed upon in a ‘specific performance’ court order. The innocent party might also pursue rescission, which nullifies the entire contract and releases both parties of their remaining contractual obligations. Finally, injunctions are a type of equitable remedy that can prevent harm or maintain status quo while the case is being resolved.
Litigation: When other informal methods such as a demand letter or arbitration are unsuccessful in resolving a dispute, the breaching party can be required to pay compensation for the full value of its loss through legal action involving Thai courts. Baker McKenzie’s team of lawyers can manage this process, including preparing the claim, appearing as counsel in local courts and enforcing or challenging an award.
Resolution Methods
Although contract disputes are a natural part of doing business in Thailand, prompt action, clear contracts and consideration of Thailand dispute resolution methods can often prevent the need for lengthy litigation. However, when it is necessary to take legal action, it’s important to have a lawyer with an in-depth understanding of the local law, types of breaches, available remedies and resolution methods.
Typically, the injured party in a breach of contract case will seek damages. These can include monetary compensation to cover financial losses, specific performance which compels the breaching party to fulfil contractual duties or rescission (which cancels the contract returning both parties to their pre-contractual positions). Alternatively, the breached party may choose to sue for other remedies provided by the Thai Civil and Commercial Code, including liquidation of assets, confiscation of property and injunction.
Breach of contract cases can be costly and disruptive to business. If you believe that your business has been harmed by a breach of contract, our Thailand attorneys can help. In addition to ensuring that your contracts are clearly worded, comprehensive and enforceable, our lawyers can advise you on alternative dispute resolution methods such as arbitration or mediation which offer a more cost-effective approach to legal disputes than traditional litigation. We can also assist in filing a claim, appearing as your counsel in court and enforcing or challenging an award.