Contracts are fundamental to business and personal transactions, outlining mutual obligations and expectations between parties. In Thailand, as in most countries, the breach of contract—when one party fails to fulfill their legal obligations—can lead to serious legal consequences. Understanding how breach of contract is addressed under Thai law is crucial for both local and foreign individuals and businesses operating in the Kingdom.
Contract law in Thailand is governed primarily by the Thai Civil and Commercial Code (CCC). The CCC outlines the principles of contract formation, performance, and remedies for breach. According to Thai law, a valid contract must include an offer, acceptance, and mutual intention to create legal obligations. Once established, parties are legally bound to honor the agreement unless otherwise specified.
Sections 369 to 394 of the CCC cover obligations and their performance, while Sections 395 to 420 specifically deal with breach and remedies. Thai contract law, while influenced by continental European systems (particularly German law), also has its own unique features shaped by local practice and court interpretations.
A breach of contract in Thailand occurs when one party fails to fulfill their contractual obligations, either by:
Non-performance: Failing to do what the contract requires (e.g., a supplier does not deliver goods).
Defective performance: Performing, but in a substandard or incorrect manner (e.g., delivering damaged or incorrect products).
Delay in performance: Failing to meet agreed deadlines (e.g., completing construction later than scheduled).
Anticipatory breach: Clearly indicating that one will not fulfill their part of the agreement before the due date.
Importantly, Thai courts evaluate whether the breach was material—significant enough to undermine the contract’s purpose—or minor, in which case specific performance or a reduced remedy may apply.
Business Contracts – including supply agreements, service contracts, franchising, and partnerships.
Employment Contracts – involving wrongful termination, unpaid wages, or violations of labor terms.
Construction and Real Estate Contracts – delays, defects, or land use violations are common grounds for disputes.
Lease Agreements – such as tenants failing to pay rent or landlords failing to provide habitable premises.
Sales Contracts – non-delivery or delivering goods that do not meet specifications.
Thai law provides several remedies when a contract is breached. These include:
Specific Performance
Thai courts may order the breaching party to fulfill their obligations as originally agreed, especially when monetary compensation is inadequate or inappropriate. This is more common in real estate or unique goods contracts.
Damages (Compensation)
The injured party may be awarded compensation for actual damages incurred due to the breach. Damages can cover direct financial loss and, in some cases, lost profits if they can be proven.
Termination of Contract
If the breach is material, the non-breaching party may terminate the agreement. Under Section 386 of the CCC, termination releases both parties from further obligations, though any breach before termination may still be subject to claims.
Penalty Clauses
Many Thai contracts include penalty clauses—fixed monetary penalties for non-performance or delays. Thai courts generally enforce such clauses unless deemed excessive or unfair.
Rescission and Restitution
In cases involving fraud, mistake, or coercion, the injured party may seek to rescind the contract and demand restitution (return to the original state before the contract).
Negotiation and Mediation
Before filing a lawsuit, many parties attempt to resolve disputes through negotiation or mediation, particularly for commercial matters. Mediation is encouraged by Thai courts and may be mandatory in some cases.
Filing a Lawsuit
If mediation fails, the injured party can file a civil claim in a Thai court. The lawsuit must outline the contract, how it was breached, and the damages sought. Legal representation is advisable, especially for non-Thai speakers.
Court Proceedings and Judgment
The court will examine evidence, hear witness testimony, and issue a judgment. In civil cases, judges—not juries—make decisions. If the claim is successful, the court may award damages or other relief.
Enforcement of Judgment
If the losing party fails to comply with the judgment voluntarily, enforcement procedures may follow, including asset seizure, wage garnishment, or property auctions.
Thai law sets specific time limits for filing breach of contract claims:
General contracts: 10 years from the date the breach occurred.
Commercial contracts (e.g., sales, transport, construction): 2 years from the date of breach.
Failing to act within these timeframes may result in the case being dismissed.
Thailand’s courts recognize and enforce contracts between Thai and foreign parties. However, foreign investors and businesses should pay attention to certain factors:
Jurisdiction clauses: Parties may specify whether disputes are settled in Thai courts or through international arbitration.
Language and translation: Contracts should be in Thai or have certified Thai translations for legal clarity.
Foreign judgments: Thai courts do not automatically enforce foreign court judgments, but foreign arbitration awards under the New York Convention are generally recognized.
To reduce the risk of contractual disputes in Thailand, parties should:
Draft clear, detailed contracts, including scope, deadlines, penalties, and Thailand dispute resolution methods.
Keep written records and communication.
Regularly review performance and follow up on obligations.
Seek legal advice before signing high-value or long-term contracts.
Contract enforcement is a cornerstone of Thailand’s legal and economic stability. The ability to hold parties accountable for promises creates trust and predictability, encouraging investment, trade, and entrepreneurship. For both local and international stakeholders, understanding and respecting Thai contract law is essential for conducting safe, successful business.
A breach of contract in Thailand is not just a broken promise—it’s a legal issue with structured remedies and clear procedures under the Thai Civil and Commercial Code. Whether involving individuals, local businesses, or foreign investors, contract law ensures fairness and accountability. By understanding how breaches are handled, what remedies are available, and how disputes are resolved, parties can protect their rights, manage risk, and contribute to a more trustworthy and effective legal environment in Thailand.
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