Breach of contract in Thailand is a complicated legal issue. While a breach of contract in any country can lead to legal proceedings, Thai law has specific limits on when a breach can occur. The shortest time limit for breach of contract in Thailand is thirty days, while the longest is 30 years. Consequently, it is critical to get legal advice when entering into contracts in Thailand. Many law firms in Thailand have extensive knowledge of Thailand’s Civil and Commercial Code and can help you navigate the Thai legal system.
Limitation of Damages
In Thailand, the civil courts have set limits on the recovery of damages for breach of contract, either direct or indirect. The aim is to return the harmed party to a financially stable position. Accordingly, civil courts do not award punitive or “general” damages. However, the 2009 Product Liability Act permits some recovery of limited punitive damages.
Although Thai laws do not specifically address the issue of contractual indemnification, a recent Supreme Court decision can provide guidance. In 1998, the court decided that a party was not obligated to compensate its own lawyers for legal fees. In other words, the court ruled that the obligation to compensate lawyers violated the Civil Procedure Code.
Liquidated Damages Clauses
Liquidated damages are contractual provisions that allow for compensation for breach of contract. These provisions can be included in the contract in case of a delay in delivery of goods or a failure to provide services. In Thailand, liquidated damages are not dependent on whether work has been completed or not. Under Thai law, liquidated damages for delay can also be reduced in accordance with section 383 of the Civil and Commercial Code. In this way, a court or arbitral tribunal can reduce the stipulated quantum if it is excessive.
Liquidated damages clauses in breach of a contract in Thailand are not yet mandatory. Although they may be beneficial to a contract, liquidated damages are not enforceable. Moreover, the court will not recognize a liquidated damages clause if it is not proportionate to the actual loss or injury. Nevertheless, liquidated damages provide predictability and protection against injury and allow for comparison of costs between the parties.
Emphasis on Express Terms
In Thailand, the law recognizes both express and implied terms as forming part of a contract. However, there is a difference between the two. Thais tend to place more emphasis on express terms than implied ones. This distinction is based on the philosophy that express terms constitute the most binding part of a contract.
In Thai courts, contractual terms are interpreted based on good faith, good commercial practice, and literal meaning. Contractual terms may also be construed by looking at common intention.
Good Faith
The concept of good faith in contract law has a wide range of applications. Generally, it prevents a party from violating a contract by acting in bad faith, even if that behavior does not violate the contract terms. This principle is often interpreted in cases where one party abuses its discretionary contractual power.
The principle is based on the fact that the contracting parties should have a good faith in each other. In other words, they should be aware of their obligations and should be able to come to a mutual agreement. Moreover, contracts should be properly drafted and should include provisions that are enforceable under Thai law.
Defendant’s Burden of Proof
In Thailand, the burden of proof rests on the defendant. This is consistent with many common law jurisdictions. In addition to proving causation, the defendant must also show the existence of a profit. In order to meet this burden, the defendant must demonstrate that a profit was accrued, as well as the amount.
Thai law does not allow plea bargaining. In fact, Thai courts require that all proceedings begin in the Court of First Instance. Furthermore, Thai court proceedings take place in open court, and the defendant must appear in person to defend himself.