Breach of Contract in Thailand

Contracts weave the fabric of commerce in Thailand binding parties to their responsibilities and serving as the cornerstone for business transactions and relationships. However, breach of contract issues can arise resulting in costly legal ramifications.

Understanding the Thai legal landscape, prevalent forms of breach, and available remedies is critical to preventing and addressing such disputes.

Negotiation

A legal dispute may arise due to a breach of contract, but this type of issue can be avoided with careful planning and diligent execution of contracts. The Thai Civil and Commercial Code outlines a clear legal framework for contract formation, types of breaches, and available remedies. Understanding these principles is vital for individuals and businesses in Thailand, enabling them to mitigate damages and preserve business relationships when contractual issues arise.

In the event of a contract dispute, negotiation is a common method for resolving the matter without involving the courts. This involves a neutral third party facilitating discussions to help the parties reach a mutually acceptable solution. If negotiations are unsuccessful, arbitration is a more formal and binding Thailand dispute resolution process that can be faster and less costly than court litigation.

If the non-breaching party is unable to recover damages through informal methods, they can pursue civil lawsuits in the courts of Thailand. However, this is a lengthy process that requires the non-breaching party to prove the existence of a valid contract, the severity of the breach, and resulting damages.

Damages are a primary remedy for breach of contract and may include monetary compensation designed to place the non-breaching party in the same position they would have been had their contractual obligations been fulfilled. Additionally, a party may be awarded consequential damages for foreseeable indirect losses resulting from the breach.

Mediation

Contracts are the foundation of business transactions and relationships in Thailand, providing a clear structure for delineating rights and obligations. When a contractual agreement is breached, it can have significant legal ramifications. In order to prevent misunderstandings and avoid costly litigation, individuals and businesses must have a comprehensive understanding of the legal framework surrounding contracts, common forms of breach, and available remedies.

In addition to monetary compensation, injured parties can pursue specific performance, a judicial remedy that compels the breaching party to fulfil its contractual duties as originally agreed. Additionally, injunctions are available for the purpose of halting the progression of injury or damage that has resulted from a breach. Force majeure clauses, which excuse parties from their obligations in the event of unavoidable events beyond their control, are also frequently included in contracts.

To minimize conflict, it is important that all involved parties enter mediation with an open mind and a willingness to negotiate. Mediation can be evaluative in that the mediator analyzes issues and relevant norms (“reality-testing”), while remaining neutral and refraining from providing prescriptive advice (e.g. “You must do this”). If informal methods like demand letters are unsuccessful, the next step is to file a civil lawsuit in Thai courts. This process is time consuming and expensive, but it provides a binding resolution.

Arbitration

Contracts are a cornerstone of business transactions and relationships, providing a clear legal framework that establishes rights and obligations. When these contracts are breached, the consequences can be significant, and understanding the legal landscape and available remedies is critical for individuals and businesses seeking to protect their interests in Thailand.

In cases of fundamental breach, the injured party may terminate the contract and seek compensation for direct and consequential losses. This is typically based on an objective assessment of the damage suffered.

Arbitration is an alternative dispute resolution (ADR) method, with the arbitral tribunal making a ruling on the merits of the case. In addition to the award, the arbitral tribunal will also apportion costs between parties in its discretion. This typically includes administrative secretariat fees, costs to subpoena witnesses and audio-visual recording fees.

It is important for both parties to understand the terms of the arbitration agreement, which can limit the scope and jurisdiction of the tribunal. Additionally, it is important to have legal counsel who can assist with the preparation of evidence, including witness statements and expert reports. Finally, it is a good idea to include force majeure clauses in contracts that excuse parties from their obligations in the event of unforeseen events, such as natural disasters or political unrest. If these initial attempts do not yield the desired results, court proceedings are often required.

Litigation

Contracts are the cornerstone of business transactions and relationships, establishing clear terms to define rights and obligations. When contracts are breached, it can have significant legal implications. Understanding the legal landscape surrounding contracts, breaching of them and the established remedies to address resulting disputes can help businesses navigate these issues effectively.

Many businesses use alternative dispute resolution methods to settle contractual disputes, such as negotiation and mediation. These methods emphasize voluntary agreement facilitated by a neutral third party and can be quicker and less costly than traditional litigation. However, if these methods are unsuccessful, parties may resort to litigation in the Thai courts to seek judicial intervention.

Disputes over breaches of contract typically involve claims for monetary compensation. This includes compensatory damages that compensate the injured party for the direct costs associated with the breach, as well as consequential damages for indirect losses such as damage to reputation or business relationships. Some contracts also include a clause specifying liquidated damages, which are pre-determined sums payable in the event of a breach.

Other remedies include specific performance, a judicial remedy that compels the breaching party to fulfil their contractual obligations as originally agreed. This can be particularly effective when addressing violations of Non-Disclosure Agreements (NDAs), which typically involve the disclosure of confidential information. In addition, some cases may call for a court-ordered injunction to enforce compliance with a judgment or order.