Breach of Contract in Thailand. Contractual obligations in Thailand are governed primarily by the Thai Civil and Commercial Code (CCC), which codifies general principles of obligations, contract formation, performance, and breach. While Thailand follows a civil law tradition, its courts interpret statutory provisions using principles of good faith, fairness, and proportionality. Thai law recognizes several forms of contractual breach, ranging from total non-performance to defective or delayed fulfillment.
Foreign and domestic parties doing business in Thailand must understand how breaches are defined, how liabilities are assessed, and what procedural tools exist for enforcement or defense. This article provides an in-depth analysis of breach of contract under Thai law and discusses how such disputes are practically litigated and resolved.
1. Formation and Validity of Contracts
1.1 Elements of a Valid Contract
Under Section 151 of the CCC, a contract is valid when it has:
-
A lawful object (Section 150)
-
Mutual consent (offer and acceptance under Sections 362–370)
-
Parties with legal capacity (Sections 19–21)
-
No vitiating factors such as mistake, fraud, duress, or illegality (Sections 155–172)
Contracts may be oral, written, or implied by conduct, except where the law requires a specific form (e.g., written form and registration for land transfers).
2. Legal Concept of Breach
2.1 Definition
Thai law does not define “breach of contract” as a single term but addresses it across several provisions of the CCC, particularly in Book II, “Obligations.” Breach is understood as a failure to perform a contractual obligation without legal justification.
Breach may occur through:
-
Non-performance
-
Delay
-
Defective or partial performance
-
Repudiation (clear refusal to perform)
-
Unlawful termination
3. Types of Breach Under Thai Law
3.1 Non-performance
This occurs when a party entirely fails to fulfill a contractual obligation. It may apply to goods not delivered, services not rendered, or money not paid.
Example: A supplier agrees to deliver machinery by June 30 but fails to do so without cause.
3.2 Delay or Mora (Section 204)
When time is of the essence or performance is due at a fixed date, delay constitutes a breach. If no time is fixed, the creditor must issue a demand notice (interpellation).
Consequences include:
-
Liability for damages
-
Accrual of default interest (typically 3% per annum under Section 224, unless contractually agreed)
3.3 Defective Performance
Occurs when a party performs the obligation in a way that fails to meet agreed specifications, whether in quality, quantity, or conformity.
Example: A construction company completes a building, but with substandard materials contrary to the contract.
3.4 Impossibility Caused by Debtor (Section 213)
If performance becomes impossible due to the debtor’s intentional act or negligence, liability still applies. Natural impossibility (e.g., force majeure) may excuse performance under Section 8.
4. Remedies for Breach
4.1 Specific Performance (Section 213)
A creditor may demand exact fulfillment of the contract, unless:
-
Performance is impossible
-
The court considers damages sufficient
-
Enforcement would be unreasonable (e.g., personal services)
In real estate or asset transfer contracts, Thai courts are often willing to grant specific performance.
4.2 Compensation for Damages (Sections 222–227)
The non-breaching party may claim damages for:
-
Actual loss (damnum emergens): e.g., cost of hiring another contractor
-
Loss of expected profit (lucrum cessans): e.g., unrealized earnings from a delayed project
To succeed, the claimant must prove:
-
Existence of a valid obligation
-
Breach of obligation
-
Causation
-
Quantifiable loss
Damages must be foreseeable at the time the contract was formed (Section 222). The burden of proof lies on the claimant.
4.3 Termination and Restitution (Section 395)
If the breach is substantial or the contract so provides, the aggrieved party may terminate and claim restitution of performed obligations. Upon rescission:
-
Each party must return what they received (Section 391)
-
Compensation may still be claimed
Termination must be exercised in good faith. A party cannot terminate solely to avoid performance where breach is trivial.
4.4 Liquidated Damages (Section 383)
Parties may pre-agree to damages payable upon breach. These penalty clauses are enforceable, but the court has the power to reduce the amount if deemed excessive or disproportionate.
Example: A contract may impose a THB 50,000 penalty for each day of delivery delay. The court may reduce this based on actual loss.
5. Defenses and Excuses
5.1 Force Majeure
Thai law excuses non-performance caused by events beyond the debtor’s control that are unforeseeable and unavoidable, such as:
-
Natural disasters
-
War
-
Epidemics
-
Government orders
Parties often include a force majeure clause defining triggering events and consequences. Absent a clause, Thai courts rely on Section 8 and general principles.
5.2 Creditor Default (Mora Creditoris)
If the creditor refuses lawful tender of performance or creates conditions preventing performance, the debtor is released from liability (Section 214).
6. Litigation Procedure
6.1 Court Jurisdiction
-
Disputes involving breach of contract are filed in the Civil Court or Provincial Court, depending on amount and geography.
-
Specialized courts handle certain contract matters:
-
Central Intellectual Property and International Trade Court (CIPITC)
-
Labor Court for employment-related contracts
-
6.2 Filing a Case
The plaintiff must file a plaint (complaint) in Thai, supported by:
-
The contract
-
Correspondence
-
Proof of breach and damages
The defendant must respond with an answer within 15 days (extendable).
6.3 Evidence and Hearings
-
Thai litigation is document-driven
-
Witnesses may testify, but cross-examination is limited compared to common law
-
Expert evidence is often required for construction or technical disputes
-
Court proceedings are generally public and conducted in Thai
6.4 Appeals
Decisions may be appealed on facts and law to the Court of Appeal and, subsequently, on law to the Supreme Court (Dika Court). Appellate procedures are written, with no new evidence allowed unless exceptional.
7. Enforcement of Judgments
Upon final judgment, enforcement includes:
-
Writ of execution
-
Seizure and sale of assets
-
Garnishment of wages or bank accounts
If the debtor fails to comply, court officers may enforce through physical seizure. Enforcement may take 3–12 months, depending on asset location and debtor cooperation.
8. Recognition of Foreign Judgments
Thailand does not recognize foreign judgments for direct enforcement. A new lawsuit must be filed in a Thai court, using the foreign judgment as evidence. In contrast, foreign arbitral awards are enforceable under the Arbitration Act B.E. 2545 (2002), provided they comply with the New York Convention.
9. Contract Drafting Considerations
To minimize litigation risk:
-
Clearly define obligations, timelines, and milestones
-
Include governing law and dispute resolution clauses
-
Specify force majeure events and procedures
-
Include fair liquidated damages and termination clauses
-
Ensure proper Thai translation for bilingual contracts
Conclusion
Breach of contract under Thai law is addressed through a coherent set of civil code provisions emphasizing fairness, foreseeability, and documentation. Thai courts provide multiple remedies including damages, specific performance, and rescission, though success depends heavily on evidence, procedural compliance, and clarity of contract terms.
For domestic and international actors alike, understanding Thailand’s civil litigation system and proactively managing contractual risk is essential for long-term commercial stability.