Construction Litigation in Thailand

The construction industry in Thailand has expanded rapidly over the past two decades, driven by infrastructure projects, condominium developments, industrial estates, and resort properties. With high-value projects and multiple stakeholders involved—owners, developers, contractors, subcontractors, architects, and suppliers—construction disputes are common. These disputes often escalate into litigation, requiring specialized legal knowledge of contracts, property law, and commercial obligations.

This article examines construction litigation in Thailand in depth, analyzing the legal framework, common disputes, resolution mechanisms, real-world examples, and practical considerations for those involved.

1. Legal Framework Governing Construction Disputes

Construction litigation in Thailand is governed by a combination of statutes, regulations, and contractual agreements:

• Civil and Commercial Code (CCC) – Provides general contract law principles (Sections 354–420 on breach of contract and damages; Sections 656–686 on contracts for hire of work).

• Civil Procedure Code – Governs the litigation process, from filing a lawsuit to appeals and enforcement.

• Contractual Terms – Most disputes are resolved based on the wording of construction contracts, which may adopt international standards such as FIDIC (International Federation of Consulting Engineers).

• Consumer Protection Act – May apply when property owners are individuals purchasing residential units.

• Building Control Act B.E. 2522 (1979) – Governs construction permits, building standards, and safety compliance.

• Arbitration Act B.E. 2545 (2002) – Provides for arbitration as an alternative to litigation, frequently stipulated in large-scale contracts.

2. Common Causes of Construction Disputes

2.1 Delay in Completion

Disputes often arise when contractors fail to complete projects on time. Owners may claim liquidated damages, while contractors argue delays were caused by owner-related issues such as late site handover or design changes.

2.2 Defective Workmanship

Quality of work is a recurring issue. Defects discovered during construction or after handover often lead to claims for rectification or compensation.

2.3 Payment Disputes

Owners may withhold payment due to dissatisfaction with work, while contractors may demand payment for completed milestones or additional work (variation orders).

2.4 Scope Changes and Variations

Disagreements arise over whether extra work was authorized, how much it costs, and who bears responsibility.

2.5 Termination of Contract

Unilateral termination by either party often leads to litigation, particularly if the termination is alleged to be unlawful.

2.6 Professional Liability

Architects and engineers may be sued for design flaws, mismanagement, or failure to supervise works adequately.

2.7 Force Majeure and External Events

Events such as floods, political unrest, or supply chain disruptions may trigger disputes over contract extensions and liability.

3. Key Parties in Construction Litigation

• Employers/Owners: Individuals, developers, or government agencies funding the project.

• Main Contractors: Companies responsible for executing the bulk of construction.

• Subcontractors: Smaller contractors engaged by the main contractor.

• Consultants/Architects/Engineers: Responsible for design, supervision, and compliance.

• Suppliers: Disputes may arise over defective materials or delayed deliveries.

Each party’s obligations are defined in the contract and supported by relevant sections of the CCC.

4. Dispute Resolution Mechanisms

4.1 Negotiation and Mediation

Courts in Thailand encourage mediation, either before or during litigation, to settle disputes amicably. Many construction disputes are resolved at this stage, reducing costs and delays.

4.2 Arbitration

Large-scale projects often include arbitration clauses, referring disputes to the Thailand Arbitration Institute (TAI) or international forums (e.g., Singapore International Arbitration Centre). Arbitration is often faster and allows appointment of experts familiar with construction law.

4.3 Court Litigation

When settlement fails, parties resort to civil litigation. Typical steps include:

1. Filing of a complaint by the plaintiff.

2. Exchange of pleadings.

3. Submission of evidence and expert witness testimony.

4. Trial hearings before a judge.

5. Judgment and possible appeals.

Litigation can take several years, particularly if cases progress to the Court of Appeal and Supreme Court.

5. Remedies Available

Depending on the dispute, Thai courts may award:

• Damages: Compensation for financial losses caused by delay, defects, or breach.

• Specific Performance: Ordering completion of unfinished work.

• Rectification Orders: Requiring contractors to repair defective work.

• Termination of Contract: Declaring the contract void with restitution of payments.

• Liquidated Damages: Enforcing contractual penalty clauses for delays.

6. Real-World Case Examples

Case 1: Delayed Condominium Project

A Bangkok developer sued its contractor for a one-year delay in delivering a condominium project. The contract included a liquidated damages clause of 500,000 THB per day. The court awarded partial damages after finding the owner contributed to the delay by failing to approve design changes promptly.

Case 2: Defective Construction of a Resort

In Phuket, resort owners filed suit against a contractor for cracks in buildings caused by poor foundations. The court ordered the contractor to repair defects and compensate the owners for lost rental income during repairs.

Case 3: Variation Order Dispute

A contractor on an industrial estate project claimed additional payment for extra piling works. The employer refused, arguing the works were included in the original contract. Arbitration ruled in favor of the contractor, awarding payment for proven variations.

Case 4: Public Infrastructure Litigation

A government agency terminated a highway construction contract, alleging breach. The contractor sued for wrongful termination. The court examined evidence of delays and found the termination lawful, dismissing the contractor’s claim.

7. Challenges in Construction Litigation

• Complex Technical Evidence: Disputes often require expert testimony on engineering standards and valuations.

• Lengthy Proceedings: Civil court cases can take years, delaying resolution of urgent construction issues.

• Enforcement of Judgments: Even after a favorable ruling, enforcement (e.g., collecting damages) can take additional time.

• Multiple Parties: Disputes may involve several contractors, subcontractors, and consultants, complicating liability.

• Foreign Parties: When foreign contractors or investors are involved, jurisdictional and enforcement issues may arise.

8. Preventive Measures

To minimize disputes, parties should:

• Use clear and comprehensive contracts, ideally modeled on FIDIC or similar standards.

• Define variation order procedures precisely.

• Include dispute resolution clauses specifying arbitration or mediation.

• Conduct proper due diligence on contractors and developers.

• Keep detailed project records, including correspondence, progress reports, and photographs.

9. Practical Considerations for Foreign Investors

• Foreign contractors should ensure contracts specify governing law and forum for disputes.

• Payment terms and securities (such as performance bonds and bank guarantees) are critical safeguards.

• Foreign parties may rely on arbitration clauses to avoid protracted litigation in Thai courts.

• Understanding the Building Control Act and local permitting process helps avoid regulatory conflicts.

10. Conclusion

Construction litigation in Thailand reflects the complexity of the industry itself. Disputes over delays, defects, payments, and scope are common, often requiring detailed technical evidence and lengthy proceedings. Thai courts and arbitration institutions provide robust mechanisms for resolution, but success depends heavily on contract wording, record-keeping, and effective legal representation.

For both Thai and foreign stakeholders, prevention through clear contracts and diligent project management remains the best strategy. When disputes do escalate, understanding the Thai legal framework and available remedies ensures parties are prepared to navigate the challenges of construction litigation in Thailand effectively.