Breach of Contract in Thailand. Contracts in Thailand are governed by the Civil and Commercial Code (CCC), which regulates the formation, performance, and enforcement of obligations. Breach of contract, while not explicitly defined in a codified manner like in common law systems, is addressed through various provisions that contemplate non-performance, delay, defective performance, and impossibility. Thai courts evaluate breaches through causal connection, good faith, and foreseeability of damages, rather than rigid doctrinal categories.
This article dissects how Thai law approaches contractual breaches, the types of available remedies, the limits of contractual freedom, and the practical enforcement landscape in the Kingdom.
1. Formation and Validity of Contracts
Before addressing breach, a contract must be legally valid under Thai law. A valid contract requires:
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Offer and acceptance (Section 362)
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Lawful object and purpose (Section 150)
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Capacity of parties (Sections 19 and 21)
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Formality compliance, where applicable (e.g., land sales must be in writing and registered)
Void or voidable contracts (e.g., contracts contrary to public policy or entered into by a minor without proper authority) are not enforceable, and therefore, breach does not arise in the legal sense.
2. Legal Concept of Breach under Thai Law
Breach of contract arises when a party fails to perform their obligations under an agreement without lawful excuse.
The CCC deals with breach-related conduct in the following provisions:
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Section 204 – Delay or default in performance
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Section 213 – Performance becoming impossible due to debtor’s act or negligence
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Sections 222–227 – Damages and compensation for breach
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Section 395 – Right to terminate the contract in case of breach
There is no distinction in Thai law between “material” and “minor” breaches as in common law, but courts consider substantiality and consequential harm in awarding remedies.
3. Types of Breach
3.1 Non-performance
This occurs when a party entirely fails to deliver performance (e.g., refusing to deliver goods or services). Non-performance entitles the injured party to seek damages or specific enforcement.
3.2 Delay (Mora Debitoris)
If the contract stipulates a performance period and the obligor fails to act within it, they are in default under Section 204. If no specific time is set, the creditor must issue a formal demand to trigger delay liability.
Consequences include:
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Liability for damages
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Accrual of statutory interest (Section 224)
3.3 Defective or Incomplete Performance
A breach also occurs if performance is delivered in a deficient or non-conforming manner, particularly relevant in construction contracts and service agreements. The CCC does not use the term “substantial performance,” but conformity with contract terms is key.
3.4 Impossibility Caused by Debtor
Under Section 213, if performance becomes impossible due to the debtor’s fault, the debtor is liable for damages, even if force majeure would otherwise excuse performance.
4. Lawful Excuses for Non-Performance
Thai law recognizes limited defenses against breach:
4.1 Force Majeure
Defined in jurisprudence as an unforeseeable and unavoidable event beyond the debtor’s control. War, natural disasters, or pandemics may be considered force majeure if they directly impede performance.
A standard force majeure clause should be included to clarify events and consequences.
4.2 Creditor’s Fault (Mora Creditoris)
If the creditor refuses lawful tender of performance or causes delay (Section 214), the debtor is excused from liability.
5. Remedies for Breach
5.1 Specific Performance
Thai courts may order specific performance if performance remains possible and damages would be inadequate (Section 213). Examples include:
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Transfer of immovable property
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Delivery of unique goods
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Enforcement of shareholder agreements
Specific performance is discretionary and must not involve undue burden.
5.2 Compensation for Damages
The most common remedy under Sections 222–227 is monetary compensation.
Types of recoverable damages:
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Actual losses (damnum emergens) – out-of-pocket expenses
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Loss of expected profit (lucrum cessans) – if reasonably foreseeable
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Incidental costs, such as legal fees and third-party losses (if proven)
Claimants must prove:
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Existence of a valid contract
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Breach by the counterparty
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Direct causation between breach and harm
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Reasonable foreseeability of damages
Thai courts typically do not award punitive damages, unless specifically allowed under another statute (e.g., consumer protection or tort law).
5.3 Termination and Rescission
Under Section 395, termination may be exercised if the counterparty breaches and the contract allows for cancellation, or if breach frustrates the contract’s purpose.
Upon termination:
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Parties must return what was received (Section 391)
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Damages can still be claimed
Termination must be exercised in good faith, and not merely to escape an unfavorable contract.
5.4 Interest
Statutory interest is recoverable for overdue debts at the rate prescribed by law—3% per annum following the 2021 amendment to the Civil Code.
Parties may contractually agree to a higher rate (up to 15%) unless found excessive.
6. Contractual Clauses and Liquidated Damages
6.1 Liquidated Damages
Section 383 allows parties to pre-agree to damages amounts, known as penalties or liquidated damages. However, Section 383 paragraph 2 empowers the court to reduce the amount if it is deemed “excessive.”
Therefore, parties must justify penalty clauses with reference to:
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Expected losses
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Market standards
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Negotiation parity
6.2 Waiver and Time Extensions
Thai courts recognize express waiver clauses and extensions of time, but ambiguous language may be construed strictly.
7. Litigation Process and Enforcement
7.1 Civil Proceedings
Breach of contract claims are filed in the Thai Civil Court (or Provincial Courts), with jurisdiction based on the location of performance or domicile of the defendant.
Litigation steps:
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Complaint and summons
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Answer and counterclaims
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Exchange of documentary evidence
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Witness examination
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Judgment and appeal
Court fees are based on the claim amount (up to 2.5%) and must be paid upfront unless waived for indigency.
7.2 Arbitration
Arbitration is enforceable under the Arbitration Act B.E. 2545 (2002). Thailand is a signatory to the New York Convention, allowing international arbitral awards to be enforced through Thai courts.
Arbitration clauses should specify:
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Applicable rules (e.g., UNCITRAL, ICC, THAC)
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Seat of arbitration
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Language and number of arbitrators
7.3 Enforcement
Upon final judgment or arbitral award, enforcement is pursued by:
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Writ of execution
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Seizure of bank accounts, land, vehicles, or shares
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Court-ordered auctions
Timeframes for enforcement vary, but court enforcement officers manage the process under judicial supervision.
8. Prescription Period
Contractual claims are subject to a prescription period of 10 years, unless otherwise specified (e.g., 2 years for tort, 5 years for hire of work). Time begins to run from the date of knowledge of the breach or injury.
9. Cross-Border Issues and Governing Law
Thai courts will apply Thai law by default, unless the contract contains a foreign governing law clause, and the dispute does not involve matters of public order or Thai immovable property.
Foreign judgments are not directly enforceable in Thailand but may be used as evidence in a new proceeding.
Conclusion
The law on breach of contract in Thailand reflects a civil law approach grounded in the principles of performance, fault, and fairness. While remedies such as damages, specific performance, and termination are available, Thai courts emphasize proportionality, clarity of contractual terms, and good faith conduct. Penalty clauses, foreseeability of loss, and causation are all central to successful recovery.
Effective enforcement requires careful contract drafting, robust evidence of breach and harm, and procedural diligence in Thai courts or arbitral proceedings. Foreign parties must pay close attention to formalities, translation of evidence, and jurisdictional limits when enforcing contracts under Thai law.