Breach of Contract in Thailand

We are often contacted to collect debts based on international and local breach of contract cases. In many cases, your attorney will send a demand letter and attempt to reach compliance or payment arrangements prior to taking any legal action.

However, this is not always possible and a lawsuit may be necessary. Understanding the legal framework, types of breach, and remedies available is essential.

Damages

In cases of breach of contract in Thailand, the non-breaching party may claim damages to compensate them for losses incurred. These could include the cost of performing the contract, lost profits or other loss and injury caused by the breach. The Civil and Commercial Code also outlines remedies such as specific performance or termination.

In the case of liquidated damages, courts can reduce the stipulated sum if it is excessive. This is consistent with practices in other common law jurisdictions.

Disputes over contractual terms are relatively common in the business world. The ability to understand the legal framework, types of breaches, available remedies and resolution methods can help businesses avoid unnecessary and costly court action. The Asian Business Law Institute (ABLI) has compiled an insightful collection on this topic that examines issues concerning extra-contractual liabilities in select civil, common and hybrid jurisdictions. It is available through the button below.

Specific Performance

In cases where monetary compensation is not an adequate remedy, non-breaching parties can seek specific performance. This legal remedy compels breaching parties to fulfill their contractual obligations as stipulated in the contract.

If you are unsure about whether or not your written employment contract violates Thai labor laws, Paully advises to read the contract closely and seek legal advice. Generally speaking though, any contract that specifies an initial date by which either you or your employer may terminate the agreement is valid under Thai law.

In addition, any contract that has a term by which you must vacate the premises by is also valid under Thai law. This is often the case with residential property in rural areas where misunderstandings of boundaries can result in encroachment by one house on another’s land. Disputes between contracting parties are usually resolved through arbitration or mediation. However, if the dispute cannot be settled between the parties themselves, the courts can be involved.

Rescission

Many disputes that come to our firm in Thailand involve breaches of contract. Whether it is from contracts on real estate, land leases or loan agreements, they all need to be addressed through legal means.

The first approach is to recover the money or assets ruled due by the court. This can be done through legal proceedings and/or through methods such as a demand letter.

Rescission is another option and involves cancelling the contract to return parties to their pre-contractual positions. This remedy is equitable and seeks to restore fairness to both parties in the dispute.

In addition to breach of contract remedies, Thai law also recognises “entire agreement” clauses in commercial contracts. This can be an important tool to use in support of claims for rescission as well as to prove the intent and meaning of contractual terms. However, it must be noted that rescission is only available if it is made in accordance with the conditions set out in the Civil and Commercial Code.

Dispute Resolution

Disputes arising from contract breach can be costly and time-consuming. While most attorneys will try to settle these issues through informal methods such as demand letters it may be necessary to initiate a civil lawsuit in Thailand. This is often the case when a material breach of contract is involved or where contractual provisions are not in accordance with Thai law.

It is crucial to understand the legal framework surrounding contracts in Thailand, the types of breaches and available remedies. This can help prevent conflict and preserve commercial relationships even when a breach of contract has occurred. It is also important to consider alternative dispute resolution methods such as mediation or arbitration. This can be a more efficient and less time-consuming solution compared to litigation. It is also helpful to have a lawyer in Thailand who can offer guidance and representation in the event that a legal action is required. Contact us to discuss the nature of your situation and how we can assist.

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