Contracts are the cornerstone of business transactions and relationships, providing a clear framework for parties to define their rights and obligations. But, sometimes contracts are breached – and when they are, there are often legal implications.
Understanding the legal landscape, common types of breaches, and available remedies is essential to protecting your business. This article will explore the topic, including negotiation, mediation, and arbitration, as well as legal action in the courts.
Negotiation or Mediation
Many contract disputes in Thailand are resolved through negotiation or mediation, which offer a cost-effective alternative to litigation. These alternative dispute resolution (ADR) methods involve a neutral third party who helps the parties reach a mutually acceptable agreement. They are commonly used in business contracts with international parties and in cases involving unique goods or property.
The law in Thailand places a high emphasis on contractual relationships based on good faith and fair dealings. The Civil and Commercial Code of Thailand outlines specific provisions that govern contract breaches and the available remedies.
In general, monetary compensation is the most common remedy for breach of contract in Thailand. These damages aim to place the non-breaching party in a position they would have been had the breach not occurred, compensating for financial losses that could have been prevented. Consequential damages may also be awarded, which cover indirect losses resulting from the breach. Liquidated damages, a pre-agreed amount established when the contract was entered into, are another form of monetary damages.
Other available remedies include rescission, which nullifies the contract and absolves both parties of their obligations. Restitution is often sought in conjunction with rescission to prevent unjust enrichment by requiring the breaching party to return any benefits they have received in connection with the contract. In addition, a court may order specific performance, ordering the breaching party to fulfill their contractual obligations as originally agreed, in cases where monetary damages cannot adequately compensate the non-breaching party.
Arbitration
Contracts establish a clear legal framework that outlines rights and obligations, and serve as the cornerstone of business transactions and relationships. But sometimes, contract violations occur that can have serious financial and reputational ramifications. While it is ideal to resolve a contract dispute through alternative Thailand dispute resolution processes like negotiation or mediation, litigation is an option when this is not possible. A well-established law firm that is highly experienced with the Thai legal landscape and prevalent forms of breach of contract will be ready to support clients in litigating such cases.
Arbitration in Thailand is governed by the Thai Civil and Commercial Code TCCC, which defines a contract as a juristic act involving an offer, acceptance, consideration, and a lawful purpose. It also sets out the basic principles of arbitration, such as the independence and impartiality of arbitrators. The courts will typically respect the choice made by parties regarding the governing law of an arbitration agreement, but may refuse to enforce such an award if it violates public policy or is contrary to Thai laws.
During the course of an arbitration, it is essential to disclose any circumstances that could cast doubt on an arbitrator’s impartiality or independence. Failure to do so could disqualify the arbitrator from hearing and render their judgment unenforceable (Supreme Court Judgment No 2231-2233/2553/2022). The process of proving the facts will require evidence examination trials, where witnesses testify to the events and supporting documentation is presented.
Court Litigation
Contracts are the foundation of business transactions and relationships, providing a framework for parties to define their rights and obligations. When those contracts are breached, it can have serious consequences. The legal system in Thailand has robust mechanisms for addressing breaches, but successful resolution depends on thorough preparation and professional legal assistance.
Civil lawsuits are one option for resolving disputes over breach of contract, and can be effective when other options prove insufficient. However, the process can be lengthy and expensive. Typically, it is best to first attempt to resolve the dispute through negotiation or mediation. An experienced Thai attorney can help you draft enforceable contracts, include penalty clauses, and negotiate or mediate on your behalf in case of disputes.
The most common remedy in cases of contract breach is monetary compensation, known as damages. This compensation aims to restore the injured party to their pre-contractual position. This can include consequential damages, stipulated or liquidated damages, and even punitive damages in rare instances.
The court may also order specific performance or rescission, which forces the breaching party to fulfill their contractual obligations. It can also provide methods to retrieve costs from the breaching party, including seizing and selling assets or liquidating them. These remedies can be a powerful deterrent for future breaches. However, it is important to consult with a seasoned Thai lawyer before filing any lawsuits, especially for high-value or international contracts.
Legal Advice
Contracts are the cornerstone of many business transactions and relationships, providing a clear legal framework that establishes rights and obligations. But when contracts are breached, it can have serious consequences for businesses. Understanding the legal landscape surrounding contracts, breaches, and remedies is imperative for businesses doing business in Thailand.
In Thailand, if a party violates a contract in ways that cause damage or loss to the non-breaching party, they may be entitled to civil damages. These damages can come in the form of monetary compensation, known as “damages,” or specific performance—a court order that requires the breaching party to fulfill their contractual duties and responsibilities.
A court will evaluate a breach of contract claim based on the law and the circumstances of the case, including considerations like commercial custom and practice, the common intention of the parties at the time the contract was entered into, whether the terms of the contract were implied or expressed, and if there is any fraudulent misrepresentation involved. The court will also consider whether the breaching party had the legal ability to enter into the contract and if it had any lawful object or purpose.
If informal methods like demand letters fail to resolve a dispute, the next step is filing a lawsuit in a Thai court. This can be a lengthy and costly process, but it offers a formal resolution that will bind the parties. Thoroughly preparing your case with detailed evidence, witness testimonies, and expert opinions as needed maximizes the chances of a favorable outcome.
