Contracts are a key component of business transactions and relationships. They provide a clear structure for parties to delineate their rights and responsibilities, but when they are violated, the consequences can have significant legal ramifications.
Understanding the Thai legal framework, prevalent types of breaches, and available remedies can empower individuals and businesses to proactively avert conflict and pursue redress when necessary.
Damages
The Thai legal system recognizes that a contract is an agreement between parties that creates certain obligations. If those obligations are not met, a breach of contract has occurred. A breach of contract in Thailand can result in a number of remedies including damages. Damages are monetary awards intended to compensate the non-breaching party for losses caused by the breach.
Additionally, a breach of contract can also lead to specific performance where a court order obligates the breaching party to perform their contractual duties.
As in any jurisdiction, it is important for both individuals and businesses to have a thorough understanding of contract law in Thailand. Understanding the legal framework, types of breaches, available remedies and resolution methods can help prevent costly disputes. In addition, seeking the guidance of a qualified lawyer can ensure that legal proceedings are handled promptly and effectively.
Specific Performance
Contracts are the threads that weave the fabric of commerce in Thailand, binding parties to their obligations and fostering trust. However, when those contractual threads unravel, breach of contract disputes can be incredibly complex to navigate. Thankfully, proactive action and legal guidance can transform discordant notes into a harmonious resolution.
Non-performance, such as failing to deliver goods or services or make agreed upon payments, constitutes a breach of contract in Thailand. Similarly, defective performance, such as delivering substandard goods or performing work with flaws and mistakes, also breaches contract terms.
Unlike European contracts, where the literal meaning of words and expressions are considered, Thai courts use good faith and commercial practice to interpret contract terms rather than clinging to the wording. This allows the court to order specific performance, a legal remedy that compels the breaching party to fulfill their contractual duties as originally agreed upon. When this remedy is insufficient, rescission can also be ordered.
Indemnification
A party to a contract can seek indemnification from another party for losses incurred as a result of the breaching party’s actions. These claims are based on the principle of natural causality, wherein the loss must have naturally arisen from or occurred in connection with the breach in the ordinary course of events.
The non-breaching party can also pursue an injunction, which is a legal mandate that halts the progression of injury or damage caused by the breaching party. Furthermore, the non-breaching party can choose to cancel or rescind the contract, effectively releasing both parties from future contractual obligations.
Understanding the legal framework, types of breaches, and available remedies is imperative for both businesses and individuals to protect their interests in contractual relationships. Baker McKenzie’s Thailand lawyers can help clients manage all aspects of the breach of contract process, including preparing claims, appearing as counsel in local courts and enforcing or challenging an award. Our team can also assist with exploring alternative Thailand dispute resolution methods to resolve disputes without resorting to lengthy litigation processes.
Termination
Contracts are the cornerstone of business transactions and legal relationships in Thailand. Understanding the legal framework surrounding contracts, breaches, and remedies is crucial to individuals and businesses engaging in contractual interactions. The Thai Civil and Commercial Code outlines the necessary elements of a valid contract, the obligations arising from each, and the available remedies in case of breach.
Breach of contract in Thailand can include non-performance, defective performance, and failure to meet specific contractual requirements. Baker McKenzie’s Thailand lawyers are experienced in navigating the legal framework and pursuing the appropriate remedy in each scenario.
Clear and detailed contractual terms can minimize the likelihood of ambiguity, resulting disputes, and complicated claims for breach. When disputes do arise, a timely response to a claim can result in more favorable outcomes, and less costly resolutions. Mediation and arbitration are popular alternative dispute resolution methods, and many contracts contain provisions governing these mechanisms. If these options prove unsuccessful, litigation can be pursued in court.
